Outliving term life insurance: What happens next?

When you outlive your term life insurance policy you will no longer have coverage, but you can convert to a permanent policy or buy new term insurance.

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Tory CrowleyAssociate Editor & Licensed Life Insurance AgentTory Crowley is an associate editor and a former licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.&Katherine MurbachEditor & Licensed Life Insurance AgentKatherine Murbach is an editor and a former licensed life insurance agent at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.

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Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Ian Bloom, CFP®, RLP®Ian Bloom, CFP®, RLP®Certified Financial PlannerIan Bloom, CFP®, RLP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, he was a financial advisor at MetLife and MassMutual.

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A term life insurance policy gives you coverage for a set amount of time, usually 10 to 30 years. If you die during that time, the loved ones you’ve listed on your policy as beneficiaries get a death benefit. But if you're still alive by the time your policy expires, your coverage will end.

If your policy’s expiration date is approaching and you still need life insurance, you can either convert it to a permanent one, or buy a new policy. The decision will depend on your coverage needs.

Key takeaways

  • Term life insurance is only meant to last for a fixed period of time. At the end of the term, it expires. 

  • If you still need coverage after, you can convert your policy into permanent insurance or buy a new term life policy.

  • If you have fewer financial obligations, you may buy a new policy with a lower coverage amount — for example, just to pay for end-of-life expenses.

  • Shop for new coverage at least six months before your policy expires to avoid a coverage gap.

Why would you still need life insurance after your policy expires?

Ideally, when your term life insurance policy ends, you won’t need coverage anymore. You’ll be at or near retirement age and all your debts will be paid off. If you die, your family won’t suffer financially without your support.

But this isn’t the case for everyone. You may still need a life insurance policy if you:

  • Have loved ones who still rely on your financial support

  • Don’t have enough savings to cover end-of-life expenses

  • Are still paying off large debts, like a mortgage

What to do if you outlive your term policy and still need coverage

As your current policy’s expiration date approaches, you have the opportunity to recalculate your coverage needs and switch to a policy with a coverage amount that meets your current financial obligations. 

Even if you still need some coverage, you’ll probably need a lot less than your original policy. 

While you technically can’t extend your current term life policy, you can:

  • Convert your term life policy into a permanent insurance policy, or 

  • Buy a new term life policy. 

How to convert term life insurance into permanent life insurance

Many term life policies come with a built-in term conversion rider, which gives you the ability to convert your policy to a permanent policy before the term expires.

The main advantage of a term conversion is that you won’t have to go through underwriting again. You'll skip the medical exam and keep your original health classification even if your health has worsened, saving you some money on premiums.

But permanent life insurance is usually much more expensive than term life. Consider converting to a permanent policy only if your health has declined to a point where you won’t be eligible for traditional coverage and you’re only looking for a permanent policy like final expense insurance

This type of coverage doesn’t require a medical exam and pays out a small amount of coverage to cover end-of-life expenses, like a funeral or medical bills. 

If you decide to use the term conversion rider, you’ll need to make this change while your policy is active. Begin the process in the final year of your term at the latest.

→ Learn more about the differences between term and whole life insurance

How to purchase a new term life insurance policy

If you’re still in good health, applying for a new term policy will probably be your best option to continue coverage. But you’ll have to start the application process from scratch. 

Because you're older now, your rates will be higher, and any new medical conditions that have come up since you first applied for your original policy will also affect your life insurance costs.

When you purchase a new term life policy, you can choose a coverage amount and term length that fits your current needs — for example, if you have nine years left on your mortgage, a 10-year policy might make sense. 

You’ll likely need less coverage than when you first got life insurance. A licensed agent can help you compare term life insurance quotes and get you the best policy to continue your coverage.

While working as a licensed agent, I advised clients who wanted to extend their coverage to start looking for a replacement at least six months before their policy expired. This way, they could shop around without having a coverage gap that would leave their family without financial support.

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What to do if you outlive your term policy and no longer need coverage

If you’ve paid off your debts and your savings can support your retirement and end-of-life expenses, then you probably don’t need life insurance anymore. 

In this case, just let your policy expire. When the term ends, so will your coverage.

Can you get money from your term life insurance policy?

Life insurance is a product for financial peace of mind, not a loan or investment, so it’s not designed to offer a return on your money. Part of the reason term life insurance is so affordable is that it only offers a financial benefit if you die. 

It works similarly to other types of insurance, like car insurance and health insurance. For instance, you wouldn't get money back from your car insurance company even if you had a perfect driving record.

Do term life policies offer any benefits while you’re still alive?

Term life insurance is designed to pay out a death benefit when you die, but there are a few instances where you could receive a financial benefit while you’re still living. 

  • Return of premium insurance 

  • Living benefits riders

Return of premium life insurance is a type of term life that returns part of the premiums you paid into your policy when your coverage expires. However, these policies may cost two to three times as much as traditional term life insurance. Most people would be better off saving or investing the difference in premiums to maximize potential gains.

A term life insurance policy could also pay out through living benefits riders. These are policy add-ons that you purchase when you apply for your policy. Your premiums will be more expensive, but you can pull from the death benefit to pay for medical expenses if you have a critical or terminal illness.

This option can support end-of-life care, but it decreases the payout your beneficiaries get from your policy.

What happens if you cancel term life insurance?

In most cases, if you cancel a term life policy, your coverage ends and you don’t get any benefit or premiums back. With term life, there are no cancellation fees. You can choose to end your coverage at any time without penalty. 

The only other way to get a traditional term life insurance cancellation refund is to cancel during your policy’s free look period, which is usually 10 to 30 days from when your coverage began. Your policy documents will state the exact length of your free look period.

Frequently asked questions

What is the purpose of term life insurance?

Term life insurance is designed to only last for a set period of time. People usually get term life insurance to last through retirement age or as long as it lasts to pay off a debt, like a mortgage. 

Term life is meant to offer financial protection if you die, but ideally, you’ll outlive the term and not need to redeem the death benefit. 

What happens if you live longer than your life insurance term?

Your coverage ends if you outlive your term life policy. If you still need life insurance after the term expires, you can choose to convert your policy to permanent insurance, buy a new policy, or go without coverage.

Do you get money back if you outlive your term life policy?

Your premiums are not refunded after your policy expires unless you bought return of premium life insurance, which is costly and not recommended. One of the reasons that term life insurance is so affordable is that it’s a simple product, only meant to provide a death benefit if you die while you’re covered.

Can you extend term life insurance coverage?

While you can't extend your existing term life policy, you can convert your term policy into a permanent insurance policy or buy a new term policy if you still need insurance coverage at the end of the term.

Additional reporting by Jessica Sillers

Authors

Tory Crowley is an associate editor and a former licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Katherine Murbach is an editor and a former licensed life insurance agent at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Ian Bloom, CFP®, RLP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, he was a financial advisor at MetLife and MassMutual.

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