What Options Do I Have After My Term Life Insurance Ends?

Do Less Expensive Insurance Options Exist?

You bought term life insurance. You were younger and it was inexpensive. But now, you're older and the term life insurance policy is up or almost up. What's your next move?

When a term life insurance policy expires, it can leave many people unsure of what to do next. The right choice depends on your current financial situation, your dependents, your health, and your long-term goals. This article helps you explore different options so you can make an informed decision.

What Happens When Term Life Insurance Expires?

Term life insurance covers you for a set period, such as 10, 20, or even 30 years. After that term period is over, the policy expires and so does your coverage.

If you still want life insurance coverage, you’ll need to apply for a new policy, attempt to renew your policy, or convert your existing one (if allowed by your insurer) to a permanent policy. However, some term policies may have restrictions and specific rules when it comes to renewing or converting your coverage.

Premiums Increase Sharply With Age
The challenge is that premiums increase sharply with age. Another consideration is whether your health has changed. Health issues that didn’t exist when you first applied may also make you uninsurable or drive rates higher. For example, a 30-year term policy that cost $30–$40 per month at age 35 could easily cost $250–$350 per month or more if purchased again at age 65. Yikes!

Options Once Term Life Insurance Expires

There are four main options to choose from after your term life insurance policy ends:

1. Renew your term policy or purchase new: Not everyone has this option—there are requirements you must meet in order to qualify for a new or renewed policy. Treat this option as if you are getting life insurance coverage for the first time; your health, age, and risk must all be assessed to qualify for approval of coverage. You will have to go through the underwriting process again, and your rate will likely increase based on your health and age. Most term life policies have maximum issue ages of 50-70, so if you’re above that range, this may not be an option for you.
2. Convert to a permanent policy: Some term policies allow you to convert to a permanent policy, such as whole life, without a medical exam.. Whole life or universal life policies provide lifelong coverage and can build cash value, but they are much more expensive than term. Well-known home finance experts like Dave Ramsey strongly advise against purchasing whole life and universal life policies. And, the older you are, the primary benefit of compounding of the policy cash value is diminished.
3. Let the coverage expire: If you no longer need life insurance coverage, you can simply let the policy expire. You no longer need to pay any premiums. Your beneficiaries will not receive a death benefit, but they may likely be at an age where a large death benefit isn't necessary.
4. Shift your focus to end-of-life planning: If your main goal has shifted over from insurance as a means of income replacement to simply covering final expenses, a prepaid funeral plan or final expense insurance plan may be a practical and more affordable alternative.

Experts advise you to act early. Don't wait until days before your term life insurance policy expires. Start exploring your options at least six months before the expiration date to ensure you have enough time to secure new coverage, or explore alternate insurance options that better fit your situation.

Why Pre-Planning Your Funeral Makes Sense

If your children are grown, your mortgage is paid off, and you’ve built up savings, you may not need another life insurance policy with a large payout. Instead of paying for new coverage you may not even need, you can direct those funds toward pre-arranging your funeral. This allows you to make sure that your final wishes are honored and your family isn’t burdened with emotional or financial decisions during a difficult time.

Unlike estate money in bank accounts, burial insurance policy proceeds do not have to go through probate, which can take weeks or months. Burial insurance policies typically pay out within a few days, making the money readily available to pay planned funeral expenses and other debts. Pre-need insurance or burial insurance policies typically do not require a medical exam, just answers to a few questions.

Summary: The Smart Next Step

When your term life insurance ends, it’s the perfect time to reassess your priorities. For many people, having their funeral fully planned brings more peace of mind and meets their current needs rather than trying to replace an expensive term insurance policy. Collaborating with a Legacy of Love Pre-Planning Counselor, you can start your funeral plan for free and then decide whether to use funeral insurance to cover the costs you identify. This ensures your wishes are in place, your family is protected from needing to access funds awaiting probate, and you stay in control of how everything is handled.

Reach out to your local Legacy of Love Funeral Planning counselor Deborah Wilson. Deborah Wilson is here to guide you every step of the way. You can start your free funeral plan now, call Deborah Wilson at 510-355-5455 or fill out our online form and we'll reach out to guide you through this process.

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