If you have purchased term life insurance, and it’s nearing its expiration date, what happens next?
Unlike whole life insurance, which provides coverage for the life of the insured, term life insurance is coverage for a set period of time where the insurer pays the beneficiary a lump sum amount if the insured dies while the policy is active. Typical lengths of coverage vary for term life insurance from five to 30 years.
Term life insurance coverage ends on the expiration date stated in the insurance policy issued. Once the policy expires and the insured did not die within the covered term, benefits are no longer payable under the policy.
As the policy term expiration date approaches, you may receive a notice from the insurance company or the selling agent. You may want to review the original policy that was issued and make note of the termination date. If you pay the premiums through auto-draft, you should ensure payments are not being withdrawn after the insurance policy has ended.
What Is Life Insurance?
If your term insurance policy is expiring soon and benefits were not paid, you may want to consider alternatives for your family’s future needs:
- Check with the life insurance agent who sold you the policy and see if it can be converted into a new policy.
- Buy a new term life insurance policy.
- Buy a whole life insurance policy and never worry about it expiring, as long as you continue to pay the premiums required; or
- Buy a final expense insurance policy.
How much you need as a death benefit for your loved ones, and the type of insurance are also important to consider.
What monetary needs would your loved ones have if they could no longer rely on your income?
Is there a mortgage, or are there college loans that will need to be paid?
If you are at a point that providing for your funeral arrangements is your only concern, a final expense insurance policy may be the solution. Final expense insurance works as term insurance, and the benefit is still released to your designated beneficiary. You may also want the death benefit to go directly to a funeral home or designate the benefit to a trust fund where it will be designated for funeral costs. Speaking with a financial planner or licensed insurance agent is recommended.
Selecting a whole life insurance may be a good choice if you have many years to accumulate value with the policy. Premium rates can be locked in for the life of the policy. A whole life insurance policy builds monetary value, and as long as the premiums are paid, the life of the policy continues. Most whole life insurance policies allow you to withdraw funds. Be aware this will diminish the total amount if you do not pay back what you have withdrawn.
Don’t wait too long in applying for new insurance. If you know your term insurance is expiring, begin looking for a replacement up to six months prior. You don’t want a gap between insurance policies where you have no coverage and no death benefits.
For a complete understanding of your insurance needs, consult a licensed life insurance agent to discuss your options.
Sources:
- https://www.iii.org/article/what-are-different-types-term-life-insurance-policies
- https://nfda.org/news/statistics
Categories: Insurance, Life Insurance, Term Life Insurance