What Happens to Term Life Insurance at the End of the Term

53% of widows have reported that they didn’t have a financial plan for the death of their spouse.

hands surrounding a cartoon of a family

Life insurance is necessary if you have others depending on your income for survival. A popular option for life insurance is term life insurance.

While term life insurance offers coverage during the term, what happens to term life insurance at the end of the term? Keep reading to learn more!

What Happens to Term Life Insurance at the End of the Term?

If you’ve outlived your life insurance policy, hopefully your need for it has gone away.

Most people only need life insurance when they have others depending on them. If you’ve chosen a life insurance policy that lasts 30 years, you’re most likely not having dependents living in your house.

While it’s fortunate that you didn’t need to use the life insurance money, unfortunately, most plans don’t offer that money back. A term life insurance plan is typically just a precautionary measure in case you have others depending on your income for survival.

While there are some plans that allow you to cash in the amount you’ve paid, most don’t. For example, a return-of-premium term life insurance plan will allow you to get the money back that you paid.

This plan is much more expensive.

Also, your coverage is only good as long as you’re under the plan. If something happened to you the day after your term life insurance ended, your family wouldn’t be able to collect anything.

If your plan has ended and you would like to still be covered, you have many options. If you’re looking at life insurance plans, you may want to consider the return-of-premium term life insurance plan if you want that money back one day.

Coverage After the End of the Term

While most people don’t seek coverage after their term has ended, many do.

Here are some reasons you may consider extending your coverage after the life insurance plan has ended:

You Still Have Dependents

If you still have people relying on you after the term for your insurance has ended, you may want to extend the plan.

For example, if you have young children or grandchildren who rely on you for support, you may choose to extend your insurance. Or, if you have a spouse who doesn’t work, you may choose to keep the plan to support them.

Protect Your Family

Even if you don’t still have people depending on you, you may choose to extend your policy to protect your family.

If you’re the primary source of income in your family and often help your relatives, you may find comfort from a permanent life insurance policy. This will cover your family for your entire life.

Getting a Permanent Policy

After you’ve outlived your term life insurance policy, you can consider upgrading to a permanent policy.

Consult with your insurance company to see if your plan includes a term conversion rider. A term conversion rider will convert your policy over to a permanent plan once your term has ended. This will make continuing a life insurance plan much easier.

You won’t have to have a medical exam done before updating your policy with a term conversion rider. Plus, you can skip the underwriting step entirely.

Depending on the age that you are when you switch, you may save money by not requiring an entirely new policy.

Keep in mind that a permanent policy is significantly more expensive than term life insurance. Also, if you’re going to use a term conversion rider to transition to a permanent policy once the term has ended, you will need to do so before the term has ended.

Reducing the Amount of Coverage

If you want to continue having life insurance as an option, you always have the option to lower the amount of coverage at the end of your term.

This is beneficial if you have fewer dependents. The fewer dependents you have, the less money will be needed to cover them should something happen to you. This will save you money but also offer a life insurance policy.

Reducing the amount of coverage is also beneficial if your family doesn’t need much extra money. The amount you choose can cover funeral costs and any other costs related to death so your family doesn’t need to come up with that.

Figuring Out How Much Coverage You Need

There are a variety of factors that impact how much life insurance coverage is necessary.

Keep these things in mind as you search for a new coverage plan:

  • Any debt you have (mortgage, loans, credit cards, etc.)
  • College tuition costs if you’re planning to pay for a family member
  • The dependents in your life
  • How much your end-of-life costs will be
  • How much of a cushion your family will need financially

Not only do these factors impact the amount you’ll need for life insurance, but the type of insurance you should invest in as well.

Your Other Options

If you aren’t interested in a permanent plan, there are plenty of other options for extending your term.

They are:

  • No medical exam term life insurance – This insurance is more expensive but beneficial for someone in poor health, as they aren’t required to get medical exams.
  • Mortgage protection term life insurance – If your only concern after your death is paying your mortgage, this would be a great option for you.
  • Group term life insurance – This is the insurance that is offered from your work. It doesn’t typically provide much money but will work if you only want end-of-life expenses covered.

Before you choose a new life insurance policy, you’ll want to speak with your family members and evaluate your current health and financial situation.

What Will You Do After Your Term Life Insurance Has Ended?

Financial security is a concern for many when they think about passing away and leaving their loved ones.

If your term life insurance has ended, don’t worry. Now that you know what happens to term life insurance at the end of the term, you can plan further into the future.

For more information about life insurance coverage in Ocean City, NJ, reach out to us today!