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When Term Policy Ends

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What Happens when Term Life Policy Ends?

Time to re-evaluate your life insurance needs

You were one of the responsible ones.  You saw the financial responsiblities coming with the new baby or with the college age kids and so you bought your term life insurance policy years ago if not decades ago.  It's served you well and knock on wood, you made it through without having to ever use the policy.  Yes, you paid premium which is now gone but that was a small price to pay on the piece of mind it afforded you and the premium was quite low you were so much younger then.  Now, the term life insurance term is coming to an end (whether it's 10 years or 30 years) and you need to decide what to do.  Let's take a look at what do when the term life policy ends.

First of all, it's a good time to contact the life insurance carrier or broker to see if there are any options to extend or pay up more term life coverage off the existing policy and at what price.  Depending on how old the policy is, many different riders were in circulation and you may have this on your policy.  Just a head's up...we don't usually recommend such a rider since the additional cost is probably better served buying additional coverage or for an extended period of time when the original policy was written.  On a per dollar/per year of term life protection, the cheaper approach is original coverage and not rider add-ons but that's our take on it.  If some type of extension option is available through the carrier (or was selected and pre-paid during the life of your policy), we need to compare the cost and eligibility requirement.  If your health has changed since the original policy to where you might not qualify based on current underwriting requirements, this extension might be something to look at.  Assuming this is not the case, we need to re-evaluate your current financial standings.

The reason you purchased your original term life insurance policy might no longer be applicable.  Let's say you purchase term life due to a new family originally.  The kids may be grown up now.  Your financial situation may be quite different (and hopefully for the better) so that you the day to day expenses that occur can be maintained in your absence.  Your spouse may have entered (or left) the work force since the original policy which would figure into needs as well.  Either way, to some extent, we need to go back through the process and re-evaluate your life insurance needs to find what is needed.  Each phase of life has it's own financial responsibilities which are distinct and no more so than in how long any new policy's term would need to be.

When starting a new family, you might have selected a longer term period to match your expecting needs.  Let's say you're 50 now and that term life policy is coming to an end.  You may now want to look at just 10 years of term to address retirement needs or the elimination of existing debt, mortgage or otherwise.  The goal life insurance, in our opinion is not to cover your entire life.  This would be tantamount to paying a $1 to get a $1 back and more likely, it's like paying $1.25 to get a $1 back.  The insurance carriers are in the business of making money after all.  This is the critical distinction with Whole life.  Some proponents of whole life insurance (typically carriers and brokers) might say that the eligibility issues at an older age is reason to get whole life.  The problem is that you will pay so much more to do so that the benefits don't materialize and this assumes that you don't lapse the policy the way many whole life policy owners do during economic downturns since whole life is generally 10 times more expensive. 

Basically, when one term life policy ends, it doesn't necessarily mean another one starts but it does deserve the research to establish if additional term life is appropriate based on the same criteria we used many years back with the original policy.  Of course, we're happy to help you with this analysis. 



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