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What happens if you outlive your life insurance?

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

Nupur Gambhir

Nupur Gambhir

Published August 14, 2020

KEY TAKEAWAYS

  • If your life insurance expires and you still need coverage, you can convert to a permanent policy or buy a new term policy

  • If you let your insurance policy expire without replacing it, your family will not receive a death benefit when you die

  • The type and amount of life insurance you buy depends on your financial responsibilities

When you buy a term life insurance policy, you purchase it for a set term, anywhere from five to 30 years. You pay premiums for the duration of the term, and if you die during that time, your family gets the full death benefit.

What happens to the policy you’ve been paying for if you don’t die and it expires? Hopefully, your need for life insurance will be gone too. People generally only need life insurance when they are paying off debts and are responsible for dependents. But sometimes there is still a need for life insurance coverage once a term policy expires. Rest assured, if that’s the case for you, there are options to make sure you have adequate coverage.

Do you still need life insurance after your term policy expires?

Deciding whether you need life insurance after your term policy expires is similar to deciding whether you need life insurance in the first place — it’s all about your financial responsibilities to your dependents and your estate’s ability to support them if you die.

As your current policy’s expiration date approaches, you can revisit your coverage needs the same as you would for any other major life event that alters your financial situation. You might discover that you need more or less coverage. Alternatively, you may no longer need coverage at all.

If you’re coming to the end of your term and think you may need continued coverage, you should start that conversation with your insurer or broker six months before your policy expires to ensure that you aren’t left with a coverage gap.

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

If you decide that you no longer need any life insurance coverage after your policy expires, you can just let it expire. You’ll pay your last premium payment, and when the plan ends, so will your coverage.

When you outlive your term policy, you will no longer have life insurance coverage — if you die the day after your policy expires, your family won’t be eligible for a death benefit of any size. The exception: if you’ve purchased return-of-premium term life insurance, which returns the premiums you’ve paid into it if the term expires without you dying. The catch — it’s much more expensive than term life insurance.

Cashing out a term life insurance policy

The caveat of term life insurance is that unlike some whole life insurance policies, there is no cash-value. No one likes to pay for something they never use, but it’s equivalent to buying travel insurance in case you get sick on your tripgeet — you pay the premium but hope to never use the service. It provides necessary financial protection — it’s not an investment.

The limitation on a term life insurance policy’s cash value is also what makes it more affordable than whole life insurance policies.

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

If you still have dependents or financial responsibilities (such as a mortgage) after your policy’s end date, you’ll still need some life insurance coverage. Although, your circumstances have probably changed since you first purchased your initial policy and there might be a different policy or coverage amount that is better suited for you, which you can now switch to.

While you technically can’t extend your current term life insurance policy, you can purchase additional coverage by converting your term policy to a permanent policy or applying for a new term policy altogether.

Converting your policy to a permanent policy at the end of the term

Most term life insurance policies come with a built-in rider called a term conversion rider, which gives you the ability to convert your term policy to a permanent policy when the term expires. If you’re unsure if your policy includes a term conversion rider, your insurer will be able to help.

The main advantage of a term conversion rider is that you won’t have to go through the underwriting process again, which allows you to skip the medical exam and keep your original rate class even if your health status has dramatically worsened since you initially applied.

Depending on your age, converting a term life policy to a whole life policy can also save you the additional cost of a completely new policy when you’re older, as you can see below:

Average premiums for women:

AGE$750,000$1,000,000$2,000,000
25$29.95$35.55$65.92
35$35.90$42.63$80.05
45$68.60$86.33$167.41
55$159.50$209.21$413.16

Average premiums for men:

AGE$750,000$1,000,000$2,000,000
25$38.87$46.15$87.04
35$43.30$52.16$99.07
45$88.70$113.03$220.80
55$225.24$289.64$574.03

Methodology: Sample based on 20-year term life insurance policy for a non-smoker in Preferred health rating. Quotes based on policies offered by Policygenius in 2020.

The disadvantage of converting a term policy to a permanent policy is that permanent insurance is, on average, five to 15 times more expensive than term coverage; so if you’re healthy and relatively young, you can expect to pay more than you were paying for your current term policy. Though it may be possible to get something called a term conversion credit to lower your payments for the first year, you’ll only see a reduced cost in the short-term.

If you decide to take advantage of the term conversion rider component of your policy, you’ll need to make this change during the term of your policy. You cannot convert your policy after it has already expired. You should begin the process at least six months before your policy’s expiration date to ensure that your policy offers a term conversion rider and you’re not left without coverage.

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Reducing the term life insurance coverage amount

You may find that while you still need some life insurance, you don’t need as much. With a partial conversion option, you can retain coverage but lower the amount. So if, for example, you only need a small benefit to pay for something like funeral costs, you can lower your premiums and keep that coverage until you die.

Purchasing a new term life insurance policy

If you’re still in good health and relatively young, applying for and buying a new term policy could be more affordable than converting your term policy to a permanent policy.

You should start the application process for a new term policy as soon as possible to avoid a coverage gap. The earlier you start, the better prepared you will be for any hiccups in the application process. For example, if your application for a new term policy is rejected, you’ll hopefully still be able to convert your current term policy into a permanent policy. Even though you have bought life insurance coverage before, changes in your health or other records could mean you’re ineligible to buy a new policy now. Again, six months before the expiration date is the minimum suggested amount of time to have a new policy in place.

When purchasing a new term policy, there are many different options to consider:

Level term life insurance

A policy that is typically referred to as term life insurance. You pay the same premiums for the entirety of the policy. This is likely the best policy option — offering the most coverage for the lowest price.

Instant decision life insurance

Instant decision life insurance policies are comparable to term life insurance — they offer traditional coverage at a competitive price. The difference lies in how you get the policy. Instead of a medical exam, the insurer conducts a background check and comes to an application decision within 24 hours.

Annual renewable term life insurance

A type of term life insurance that allows you to re-evaluate how much you spend on premiums every year. During the first few years of this policy, you’ll typically pay less than you would with other term policies, but the rates do increase each year and end up costing you more in the longrun.

Decreasing term life insurance

Rarely offered by insurance companies, decreasing term life insurance is usually a cheaper option for term life insurance. With this policy, you pay the same amount for premiums each year, but the benefit amount decreases each year.

Return-of-premium term life insurance

The one type of term life insurance policy where you can get your premiums back at the end of the policy term, though at the cost of higher premium rates. The return in cash value is often less than what you can accumulate by simply investing the difference between a return-of-premium policy and a level term policy.

No-medical-exam term life insurance

The best policy type for people adhering to stay-at-home mandates as it doesn’t require a medical exam. No-medical exam life insurance underwriters usually still conduct an in-depth evaluation of your health through previous records.

Group term life insurance

Employer-sponsored life insurance that is often subsidized in cost. It’s easy to get but often doesn’t provide enough of a death benefit and if you leave your job, you lose your coverage.

Mortgage protection term life insurance

The best policy for people who are most concerned with paying off a mortgage in the event of their death. There aren’t any other benefits when purchasing this type of term life insurance policy.

How to determine how much life insurance coverage you need

The factors to take into account when determining how much coverage you need to buy replicate the qualifiers from the first time around — do you have any outstanding financial responsibilities or dependents who rely on you? These elements influence how much and what type of term life insurance you will buy:

  • Outstanding debt, like a mortgage
  • Future cost of college tuition
  • Dependents, including children and aging parents
  • End-of-life expenses for yourself
  • Financial cushion for your family

Check out our Policygenius coverage calculator to help you crunch the numbers and figure out exactly how much coverage you need:

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The bottom line

If you outlive your life insurance policy and you don’t need any more coverage, you can simply let your policy expire. But if you still need financial protection for your loved ones, you should convert your term life insurance policy into a whole life insurance policy or get a new policy altogether. Not doing so risks the financial health of your family and negates the reason you bought your original policy in the first place. Make sure to plan for coverage at least six months before your policy expires to accommodate any hiccups in the application process.

The best policy option for new coverage is term life insurance — it’s usually the lowest priced for the most amount of coverage. But if your health or age make you ineligible for a traditional term life insurance policy, guaranteed options like final expense insurance are available.

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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