When you purchase a term life insurance policy, you’re typically covered for a set period of time, which could be 10 to 30 years. But what happens when your policy expires?
It’s likely your life has changed since you bought your policy, and you may need new or different protection for your family. In this guide, we’ll be going over some of the options available to you once your term life insurance coverage ends.
Whether you’re looking to renew your life insurance coverage or explore different types of term life insurance, we’ll help you make the best decision for your needs.
The basics of term life insurance
Term life insurance is an accessible and affordable way for families to financially protect themselves in the event of a tragedy. It provides temporary coverage for a specific period, with a fixed premium rate for that period of time.
Your life insurance beneficiary will receive a lump sum death benefit if you pass away during the insured period.
Term life insurance is simple and straightforward to understand and sign up for, making it a popular choice among those who are looking to provide peace of mind but don’t want overly complicated policies. If you’re interested in Lemonade’s term life offering, you can start the digital application process by clicking on the button below!
What happens when your policy expires
If your life insurance policy term is coming to an end, you can let the coverage expire and your life insurance company will stop charging your premium payments.
But, this means that if the policyholder passes away after the expiration of the term life insurance policy, the beneficiary won’t be eligible to receive any benefits from the plan. This option may make sense if you no longer have dependents to support or you have enough saved assets to financially protect yourself.
It’s also very likely that your situation has changed since you first bought your policy and you may need more or different coverage. That’s why it’s important to review your policy before the due date and decide whether or not you need to extend or renew it. If you still need coverage and don’t want your policy to lapse, you have three possible options, depending on your insurer.
- Extend your current policy
- Convert your term policy into a permanent policy
- Purchase a new life insurance policy
Renewing or extending your term life insurance policy
Some term life insurance policies are guaranteed renewable, which means you can continue renewing your policy—including your current amount of coverage and death benefit—for as long as you want, without proving insurability and taking a medical exam.
However, your life insurance company will likely charge you higher life insurance premiums. (FYI, the term life policies offered by Lemonade are not guaranteed renewable.)
To renew or extend your life insurance policy, simply contact your insurance company before your policy expires to see what your options are. Some policies automatically renew and charge you higher premiums unless you cancel the policy or purchase a new one. Each insurer might have different regulations.
Renewing or extending your term life insurance is a good option if your coverage amount is still right for you and your needs, or if you had a change in health status. For example, if you were recently diagnosed with a terminal illness, you may not qualify for a new policy with the same benefit.
Keep in mind that depending on your policy details, your premiums may increase every year, which may make renewing not a viable option in the long run.
Converting your term policy into a permanent policy
Another option is to change the type of policy you have. Some term insurance policies allow you to convert your policy into a whole or permanent life insurance policy without going through the application process and taking a medical exam.
Like the name suggests, permanent life insurance gives you permanent coverage for life. As long as you keep paying your monthly premiums, your life insurance company will pay a death benefit to your beneficiaries after you’re gone.
Whole life insurance policies also come with a savings component, which grows over time. The policyholder can often borrow from the cash value of a whole life insurance policy while they’re still living in order to cover daily needs or big expenses.
Some types of life insurance, like universal life insurance, come with a guaranteed minimum interest rate and invest your cash value in the stock market, though you don’t have a choice on where your money is invested. It’s a relatively safe way to grow your money over a long period of time.
Converting your term life insurance policy into a whole life insurance policy can be a great option for those looking for long-term security or to get more value from their life insurance policy. If you’ve recently developed a chronic illness, converting your policy to a permanent policy can ensure long-term coverage. The downside to conversion is that your options may be limited and your premiums will likely be higher.
Make sure to review your life insurance company’s policies on conversion to see what the best options are. Converting your term life insurance policy into a permanent policy may be a way to ensure that you and your family are protected over the long-term.
Purchasing a new life insurance policy
If your coverage needs have changed since you first bought life insurance, you may want to buy a completely new policy. With a new policy, you can adjust the death benefit amount or cash value, and shop around for more affordable coverage.
But how much life insurance coverage do you need? Consider any financial needs you may have, including:
- Loved ones who rely on you financially
- Financial obligations like a mortgage or college fund
- Credit card debts and other personal loans
- Retirement funds
- Funeral and burial expenses
Before you buy life insurance, make sure to do your research. You can compare life insurance products or life insurance rates across different providers by requesting quotes from different companies. Taking these steps will help ensure that you find a life insurance policy that matches both your needs and your budget.
Keep in mind that because you’re buying a completely new insurance policy, you’ll have to provide evidence of insurability, which may include a medical exam.
Why having life insurance is important
Having life insurance is an essential part of providing financial protection for you and your loved ones. Not only does it help people cope with the unexpected in the event of death, but it can also provide benefits such as covering debts, paying for funeral expenses, and even helping to replace lost incomes.
Having a life insurance policy in place can give you and your family peace of mind that if something unexpected were to happen. To ensure you’re properly covered, it is important to review your coverage regularly and adjust it as needed based on changes in your life, especially if your current policy is getting close to expiration. By taking these steps, you’ll be well-prepared for the future.
To start your quote for Lemonade’s term life insurance offering, simply click the button below.
