Last Updated: August 2020
If you’re about to outlive your term life insurance policy, then you may not know all your best options. It’s best to prepare for this before your term policy expires, but even if your policy has already expired, the advice below will help. We’ll show you all 5 options you have after it expires.
The common move is to research another life insurance policy which is a fine option under certain circumstances. However, as an agency that speaks with dozens of consumers daily about their life insurance options, we find that many are suited for much better options.
When you’re approaching the end of your term life insurance policy, here are your choices. Click to read more about each option.
- Continue Your Current Policy (Avoid This)
- Convert to a Permanent Life Insurance Policy
- Life Settlement: Sell Your Policy
- Purchase a New Life Insurance Policy
- Go Without Life Insurance Coverage
1. Continue Your Current Life Insurance Policy (Avoid This)
This is the option you want to avoid.
Most term policies typically turn into an “annually renewable term” (ART) policy which basically means your life insurance rates at the end of your term will increase significantly. The rates are typically so expensive, many people can’t afford them.
Even if you can afford them, the rates will go up every year (unless you have a term & universal life hybrid policy).
Some carriers will keep the premium level, but dramatically decrease the coverage at the end of the term. This is less common.
Contact your life insurance company and ask for an “in-force illustration” and you’ll see your projected premiums will become expensive. If you need more coverage and you can qualify, you’re better suited to purchase a new life insurance policy. Even term life insurance for seniors with poor health can be cheaper.
2. Convert to a Permanent Life Insurance Policy
Depending on the company and their life insurance conversion options, you may be able to convert your policy with no evidence of insurability to a permanent policy just by filling out some simple forms.
Even if you have serious health issues, you may have the opportunity to convert your term policy to a permanent one. Qualification is based on your current age and the life insurance company’s guidelines on conversions.
This is a Great Option if You Have Health Issues
If someone has developed health issues and can no longer qualify for traditional life insurance and they’re within their conversion period, this is typically the best route.
The process to explore a term life conversion is to contact your initial agent and let them know you want to explore converting your life insurance policy. They’ll let you know your options.
If you don’t have contact with your agent, contact us and we’ll let you know what your conversion options are.
A good rule of thumb is if you’re under the age of 65, you likely have a conversion option.
Don’t Contact Your Life Insurance Company
We don’t recommend contacting customer service at your life insurance company. There are two reasons for this.
- They’ll likely refer you to a local agent.
- Or, they’ll provide you the information and best options for their company, but they won’t be able to help if you could get lower rates with a new company.
They simply aren’t licensed to make any recommendations or design the policy to be the best possible option for the situation. Permanent life insurance policies require an agent to design the coverage and an off the shelf version of a life insurance policy typically isn’t designed for maximum efficiency.
Every life insurance company’s conversion options are different. Contact a veteran life insurance agent that has done conversions before. And actually ask your agent these questions:
- Have you ever converted a life insurance policy before?
- How comfortable are you with designing permanent life insurance policies?
If they don’t answer those questions, you should find a more experienced agent.
3. Life Settlement: Sell Your Policy
If you’re in poor health, on a fixed income and you can’t afford your term life insurance policy anymore, you may be able to sell it on the secondary market. Meaning you could get a significant amount of money.
If the policy is within the conversion period and your health has declined, we can solicit offers from investors who will essentially buy your policy from you. What they’ll do is convert the policy to a permanent one and take over the payments. When you pass away, the investors will receive the death benefit.
Many are uncomfortable with this, but this is a legitimate marketplace and is completely legal. It’s a highly regulated segment of the industry, especially since seniors are involved.
We’d be happy to help you evaluate your policy and get offers on it.
How to Sell Your Life Insurance Policy
If you want to get some offers on your policy, here is the process.
- On your side, we’ll need to complete a health profile and get some information from the life insurance company and what your conversion options look like.
- From there, we’ll put together a package and send it to our investors anonymously without your name attached to it.
- We’ll get multiple offers back, do a little negotiating to get you more.
- Then, if you choose to accept one of the offers, we’ll formally apply.
Typically you need to be over age 65 and in declining health to explore this option.
4. Purchase a New Life Insurance Policy
If you’re still in good health, you can purchase a new life insurance policy. Many times, it simply makes sense to start a new guarantee period over again.
You can even consider some type of permanent insurance or even a mix of a small permanent insurance policy and some term coverage.
Typically at the end of a term, many of our clients will buy a small $10,000-$100,000 permanent policy and a small term life insurance policy.
Keep in mind that rates will be a lot more expensive because your older so make sure you speak with an independent life insurance agent who can look at all the best life insurance companies on the market for you.
5. Go Without Life Insurance Coverage
If no one is financially dependent on your income or will be burdened from your untimely passing, then going without coverage makes sense.
If your life insurance is set to expire within the next few years, you should start weighing your options now because your age may limit your future choices.
The best thing to do is to contact an independent life insurance broker. Fill out our quote tool or give us a call, and we’ll weigh all your options and present them to you before your life insurance expires.
I like some help with a term insurance that will expire when we both turn 80. My husband is 66 and I 64. What are our options?
Hi Shanti, You can buy a 20 year term and cancel it early (when you turn 80) and your husband can buy a 15 year term and cancel it early as well. Alternatively some companies like AIG will offer a 14 year term to your husband and a 16 year term to you – to get you to age 80. Fill out the form on this page and someone will go over the most affordable options for both of you.