This is a question that we often get asked quite a bit when we are performing annual policy reviews with our clients. The answer is not that easy. To “extend” the life of your policy, there are a few great options.
While negotiating a new term life insurance policy with a client, especially if they have gotten life insurance quotes on our website, we typically show the premiums for various term lengths, ranging from 10 to 30 years. Unless there is an urgent need for a short time period (for instance, 10 years to pay off a short-term loan), we will frequently recommend the longest term available (30 years for most age groups).
We are aware that there are financial factors to consider, but we will show a client that going with a longer term is often less expensive overall. The charges may be significantly higher after a shorter term if the client’s health class changes as a result of declining health.
My current advice is the same as it has always been: choose the policy with the longest term length that is appropriate for your age when purchasing term life insurance.
Loss of Term Life Insurance
Your policy is not technically “kicked out.” By the time your term is up, the rates will have significantly increased, but you can still make premium payments. Insurance brokers that are working in your best interests will often stop you from having to take that action.
We always recommend a longer-term if there is no realistic situation in which we would want our policy to expire. This is significant since you lock in rates when you’re younger.
I assure you that purchasing a 30-year term life insurance policy at the age of 31 will be far less expensive than purchasing a 10-year term policy at the age of 61.
20/20 hindsight. Having a temporary policy, what should I do?
The term of your life insurance policy is coming to an end, and you just want to know your options.
The most obvious solution is to buy a brand-new term life insurance policy. The application and application process will need to be started over again, which is a negative of this route, but it will almost always be less expensive than continuing to pay the premiums on your present policy after the term has ended.
Your premiums won’t be as affordable as they could be, as I have indicated, but they’re virtually always the best choice.
Can You Convert Your Policy?
One amazing advancement in the life insurance industry is the potential of converting your term life insurance policy to a permanent life insurance policy in order to protect you from this particular situation.
These options are not always available, and many policies place limitations on “when” you can make these changes.
You must comprehend your policy completely.
What do I mean when I say that timing your term life insurance switch is important? Not all policies are created equal.
Some carriers may only permit monthly conversions of your term life insurance policy. To put it another way, you only have a certain amount of time to convert your term life insurance policy to a permanent one.
These times are frequently covered within the first five years of the policy’s release. Another common restriction is Convertibility to “Specific Age.”
You can convert your policy as long as you are younger than the policy’s maximum age. The age of 70 is a decent starting point, albeit it is not always the same.
Several term life insurance policies don’t have these limitations, and you can switch to a permanent policy at any point throughout the term.
Do I get my money back when my term life insurance policy expires?
This seems like an obvious choice. Why would an insurance company take on the risk of paying a death benefit in exchange for a monthly premium and then returning your premiums if you outlive the policy?
There are actually two ways to get a return from your life insurance policy:
The initial one benefits from a Return of Premium Rider.
The first limitation on using this is that you will not be reimbursed for the WHOLE amount of premiums you have already paid if you cancel before the end of the term.
The additional drawback of having this rider is that it will cost you significantly more in premiums over the duration of your policy in exchange for the ability to receive a refund of your premium payments.
When it comes down to it, you must choose the trade-off that is best for you. Term life insurance is the most affordable option for safeguarding their family and income.
When you include in this return of premium rider that is no longer the most affordable alternative.
When asked if you get your money back at the end of a term life insurance policy, however, the short response is “no.”
Unless you have a return of premium rider or convert your policy to a permanent one, you won’t receive any money back if you outlive it.
Sell Your Policy
I did mention that there were two ways to pay for or benefit from your term life insurance policy, the first of which was the return of premium rider.
Your second option is to sell your Term Life Insurance policy.
Another name for this is viatical settlement. Although picking this course of action depends heavily on the circumstances, it can actually make a lot of sense for a small number of people.
There are many disadvantages to this strategy if you’re trying to sell a policy that is nearing the conclusion of its term. The amount of cash value or remaining term (in the case of term life insurance) that affects a policy’s value is directly related to both factors (permanent life insurance).
Renewable Life Insurance
So, there is one more option.