What Happens If You Outlive Your Term Life Insurance?

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Americans are living longer. According to the U.S. Census Bureau, the average life expectancy is 79.9. That’s the average, but many people live a lot longer. At this later age, many people are finding they have outlived their term life insurance policy.

Sometimes, outliving a term life insurance policy is intentional. The reason for it is gone. But many who have spouses or dependents may need additional life insurance. What do they do?

Why Extending Term Life Insurance Could Be Important

The main reason for a term life insurance policy is to support your dependents should you die prematurely. Many will buy life insurance in their thirties or forties to protect their spouse and dependents. Some buy it to pay the mortgage if they die early.

And for those people, that responsibility or perceived obligation changes. But some grandparents have turned into parents again and are raising grandchildren. Others have adult children with physical or psychological problems who are still dependent.

Losing their term life insurance in their  sixties or seventies could be concerning. But you have options.

Plan for the Expiration

Be aware of the expiration date. Don’t wait until the insurance company sends you a letter saying you are no longer insured. You need to start a year ahead of time to find additional coverage.

If your term policy hasn’t expired, you can take advantage of a built-in term conversion rider. Most term insurance policies have them.

Convertible Life Insurance Policy

Although each insurance company has different rules, they all generally work the same.

A conversion period is the time frame when you can convert the term policy to a permanent policy. You can usually convert before you turn 70 or before the term policy ends. For example, if you have a thirty-year term policy you bought when you were 40 and are 69, you can convert your policy to a permanent one.

You can also convert your policy if you have one more year left on the policy. But you must convert it before it ends.

The insurance company will specify what type of permanent insurance policy you can convert to. Most coverage options are universal life insurance or whole life insurance.

Permanent policies give you lifetime coverage as long as the premiums are paid. Permanent life insurance policies have a cash-value component. That means they include a tax-deferred cash value that grows over time and can be withdrawn or used as collateral for a loan.

You can also do a partial conversion. In other words, you may have a $500,000 term life insurance, but feel you only need a $100,000 policy, so you convert part of it. There’s usually a minimum you can convert when moving to a permanent policy.

You should consider converting if you have a health condition and don’t think you can qualify for a new policy if you switch companies to another term life. There’s no physical when converting a term life policy to a permanent policy. But your premiums will be higher.

Keep in mind none of this will happen if you don’t have the built-in rider on the original policy. If you haven’t bought a term life insurance policy yet, it’s important to discuss it with your insurance agent.

Extend Current Term Insurance Coverage

Some term policies have a guaranteed renewability provision. You’ll have coverage as long as you pay premiums. Your premiums will rise each year. In some cases they will rise considerably because they’ll be based on your age.

If you extend your coverage, you usually don’t have to take a physical. Though it may be costly, some companies will allow you to renew up to 95.

Look for a New Policy

If you let your policy expire without taking any action, you might need to find a new one.

Some companies will write policies up to age 80, but you usually must take a physical. This is especially true if the policy is over $50,000. The best course of action is to research companies.

Buy Several Small Policies

For those with health issues who can’t afford a high-limit policy, purchase several small policies. They may be a little more burdensome, but at least you'll have coverage.

Purchase Burial Insurance Policy

Although they have a foreboding name, this is a whole life policy with small payouts. It usually only pays $20,000 to $25,000. Your heirs could use it to bury you or do anything they want. There’s usually no physical exam for this.

Term Life Insurance Expiration

The first item you should check off your list when you know your term life insurance policy will expire is to determine if you need it. If all your dependents are gone and you’re financially well off for your spouse’s needs, do you even need the policy?

If you do need the coverage, then consider a smaller amount.

Ensure you plan ahead. You’ll end up shopping for a new policy if you don’t plan to convert or extend coverage a year in advance. You’ll also have to have a medical exam for any new policies.

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