The best type of term life insurance is the kind you don’t ever have to use. Outliving your policy is the goal. But when your term life insurance is coming to an end, don’t just ignore it — you still have decisions to make.
What is your financial situation? Do you still have children to support? Do you want to retain coverage throughout your retirement years?
The primary reason you purchased life insurance was to replace any income that would be lost if you died prematurely. Ten to 30 years ago, this figure was probably high. You may have bought a policy worth at least 10 years’ worth of income.
Now, if you have more money saved, less debt and fewer people depending on you for support, you may be able to let your policy expire without a thought. But if you’re looking to have term life insurance coverage extended, you have three main options to choose from.
Most term life insurance policies come with a guaranteed convertibility provision. You don’t have to undergo a medical exam, so it’s a good option for someone whose coverage quote may change drastically based on changes in their physical health.
The important issue to remember is that you have to begin the conversion process before your policy expires. Many policies also limit this option to those under a certain age, typically 70.
You could decide to purchase a new policy. This means you will have to go through a medical exam. If you’re younger than 60 and you are in general good health, this is likely the most affordable option.
Your third option is to simply renew your policy on an annual basis. If you let it expire, your policy automatically converts to an annual renewable term. You keep coverage by continuing to pay the premiums. The main downside to this option is that the premiums increase drastically and will continue to increase as you get older.
This is a good option for someone who wants to continue coverage for a short time, such as a two-to-three-year period. It’s also the best option if you missed the opportunity to convert your policy and you’re ineligible for a new policy due to declining health and old age.
At Four Seasons Insurance, we help guide our clients through major financial choices, such as how to manage the expiration of their term life insurance. This decision can have a major impact on your family. Walk through different scenarios with the help of our caring team — call to set up an appointment today!
