Your Term Life Policy is Expiring–What’s The Next Step?

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Let’s assume you did your research on term life versus whole life insurance and opted for term life insurance. Fast forward some years and your term life policy is about to expire. What is the next step you should take?  Continue reading to find out what your options are. This is not something you can ignore because the wrong decision can negatively impact your family’s life.

The Dilemma

Expiring_life_insurance_policy

In theory, a term life insurance policy is supposed to be in place typically for 20 or 30 years (your working years) in case you die prematurely. During your working years you should also be saving for your retirement. If you have a mortgage and have a family with young children, the face value of the policy is to replace the income your family would have otherwise received.  But what happens when you are now age 50 or 60, your policy is about to expire, and you need more coverage? This could be a reality due to:

  1. Marriage or remarriage late in life and still have children to support.
  2. Early retirement (either by force or free choice) before you have enough money saved to protect your spouse if you should die first
  3. Unforeseen illness that has depleted your retirement savings

 

The Solution

 

Here are four possible solutions depending on a particular scenario:                                                                                                                                                                                                                                                           Healthy Seniors

 

 1.    If you are in good health and need coverage for just a few more years, look for a term life policy that is for 5, 10, or 15 years. Chances are that premium prices will still be relatively affordable if you are in your 50’s and 60’s, especially if you are a non-smoker. In addition, you probably will not need as much coverage as you did when you were in your 30’s. For example, a 60 year old may pay about $80/month for a $250,000 10-year term policy depending on health, home state, and the insurance company.

2.    If you are in good health and you know that you will need coverage for the rest of your life, consider choosing a type of insurance called “guaranteed no-lapse universal life” or “universal life with secondary guarantees”. Be aware however, that these policies do not offer cash values like ordinary whole life policies. The advantage of getting this type of policy is that you can get late-age term insurance with a lifetime guarantee which costs less than traditional whole life insurance. The guarantee will remain in effect as long as you pay your premiums on time.

Unhealthy Seniors

3.  If you do not have good health and cannot find insurance on the open market that is affordable, your current insurer can convert part or all of your term policy into some form of permanent insurance. A medical exam will not be required. Your insurer will offer whatever conversion policies that are available. However, time is of the essence. This has to be done before the term policy expires–usually within the months or weeks just before it expires. If you let this window of opportunity pass, it will be too late.

4.  If you have poor health and cannot pass a health exam and miss your chance to convert your term policy to permanent insurance, you are basically out of luck. You can choose to continue your expiring term insurance regardless of health, but you will be paying much higher premiums. These premiums will continue to increase yearly by large amounts until you can no longer afford to pay them. If you know that you are going to die very soon, then this may be your best option. Otherwise, if you already have enough money saved that could support your family in the event of your death, put the money once used to pay for premiums toward your retirement savings instead.

 

I truly hope that I have given you something to think about regarding what your course of action should be when your term life policy is approaching expiration. It is very easy to go about our daily lives not realizing how time flies and before you know it, you find out your policy is going to expire soon. Be proactive by doing your research and come up with a plan that is best suited for you and your family. If you have any questions or comments, feel free to put them below and I will respond in kind.

Thanks for reading my post, and have a wonderful day.

Deidre

Source: “The Term Life Decision: What To Do When Your Policy Expires” by Jane Bryant Quinn.  AARP Bulletin/Real Possibilities, March 2016 Vol.57  No. 2  pg. 12      aarp.org/bulletin
All photos courtesy of Canva.com

 

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6 thoughts on “Your Term Life Policy is Expiring–What’s The Next Step?

  1. Barry says:

    Insurance is one of those you don’t think about until you wish you had. You certainly have given me a lot to think about.

    One of those things is, Do the rates vary that much from company to company? Also, are some companies more ethical than others.

    See the plan was get term and just as it was about to expire to be in a financial situation that would allow me to keep the same rate but lower the amount of insurance.

    Great plan right? Have you ever heard of life and how it tends to disrupt plans? Thinks don’t always go as we plan.

    Thanks for the 4 options for me to see where I fit in.

    • Deidre says:

      Hi Barry,

      I’m glad that I have given you some useful info regarding term life insurance. Yes, rates can vary from company to company. I would highly suggest that you do your due diligence and check out each company you are considering for its rates as well as the better business bureau and/or state attorney general’s office to see if there are any complaints filed.

      Someone once told me that “life” insurance should instead be called “death” insurance because it does not come into play while you are still living. Who said life is easy? We have to hope for the best but plan for the worst. Having the right term insurance is just one of the things one must do to protect one’s family.

      Hope that all works out for you, and thanks for your comments.

      Deidre

  2. David says:

    Deidre, some really useful pointers here. I am in the situation you have described here, wherein I am in my early fifties and concerned about the future.
    I will certainly be looking into the suggestions you have made, particularly with regards to term life polices.
    Hopefully, I can start to look ahead with some positivity, so thank you.
    David

    • Deidre says:

      Hi David,

      Glad that I was able to be of help to you. Life insurance in general is not a subject most people want to think about but it is necessary because no one but the man above knows what the future holds. Hope everything goes well.

      Deidre

  3. Jonathan says:

    Deidre, a lot of great points here. I really like term life insurance because of its affordability but I also like whole life because of all the benefits it provides like cash value and loans. Which ever one picks let it be in the best interest of their family. I myself need to get some because I have no protection in place. Been without a job so lost my previous policy. It’s a struggle to decide what’s most important in one’s finances when financial hardships are at place. What are your thoughts on that subject?

    • Deidre says:

      Hi Jonathan,

      Sorry to hear that you lost your job. So I can only imagine the difficulty you are currently experiencing regarding financial hardship. As to how to decide which is most important in one’s finances during difficult times, I would make sure my most important bills are paid on time–mortgage, credit card debt, personal loans, etc. I would make these a priority because if you fall behind, these debts will ruin your credit rating and they may in turn send deliquent accounts over to a bill collection agency that will come after you for payment. This is what I did right after I filed for bankruptcy and my debt was discharged. Of course, no two people’s financial situation is alike. Therefore, I would suggest you get professional help from a financial planner or accountant. Thanks for commenting and I hope this helps.

      Deidre

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