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What Happens to Term Life Insurance If You Don’t Die?
It’s a common question we hear all the time: what happens to term life insurance if you don’t die? What happens next depends on your policy and what your insurer offers as a next step. We’ll walk you through the different options below.
But first, the basic answer: in most cases, unless you take action, your coverage will end at when your term is complete and you will no longer have an active policy.
However, many term life policies have options that let you continue or convert your coverage so that you don’t have to go without. The trade-off? It might cost more than you expected. That’s why it’s in your best interest to pay attention to your policy details so you know what your best – and most affordable – option might be.
We’ll walk you through those options below.
Option #1: Your policy expires and you have no coverage.
First things first – many term life insurance policies contain a provision for conversion or renewal at the end of your term.
However, if you don’t look at your policy documents (or call your agent for help), you might not realize you need to take action. Some policies will simply expire; others will automatically convert to yearly renewals. Either way, you need to have a look at your specific policy.
If your policy doesn’t contain a provision for conversion or renewal, it will expire at the end of your term. Your monthly payments will stop, but that’s because your coverage is no longer in place. If you pass away after the expiration date, no money will be paid to your beneficiaries.
If you want more coverage, you have to start the application and approval process all over again. The tricky part with that is your current age. Because your age factors into the price of your policy, and because you’re older than you were when you bought your expired policy, expect to pay more to replace the coverage that expired.
Summary: If you take no action, what happens to term life insurance if you don’t die? You’re alive – which is great – but you have no further life insurance coverage at the end of your term unless your policy contains provisions for automatic yearly renewals.
Option #2: Your policy converts to annual renewable.
If your term life insurance policy has the option to convert to an annual renewable term policy, great! Some policies will do this automatically, but others will require action on your part to make this happen. It all depends on your insurer and the specific policy you bought. You’ll have to take a look at your policy documents (or call your agent) to learn more.
Converting your policy to an annual renewable term has its benefits. The most important benefit is continued coverage. If something happens to you, you’re still insured. Your beneficiaries will get that income-tax-free death benefit – which is the whole reason you purchased life insurance, right?
But there is also a drawback…and that’s the cost. Because you’re older now than when you first bought your policy, the renewal price is going to reflect that. And it’s going to reflect it every year upon renewal. If you’re on a tight budget, this isn’t an ideal long-term solution. In a pinch, however, it may work while you figure out how to get more coverage at a better price.
If you only intended your coverage to last through a specific time – such as the length of a mortgage or your working years – you may only need a couple more years of coverage. In that case, you’ll have to weigh the option of paying more for a few yearly renewals against the option of getting a new policy for the duration of your financial need. If that’s the case, we’re happy to help! Let us get you a new, current quotes so you can see if a new policy is more affordable than your renewal. Click here to get a fast, free quote!
Summary: If your policy converts to an annual renewable, what happens to term life insurance if you don’t die? In this case, you still have coverage that’s guaranteed for a year at a time. However, every year, you’ll pay more to keep that coverage in force.
Option #3: You’re still within the window of time provided to convert to a permanent policy.
Many term life policies include a time period you can use to convert that policy to a permanent policy. That time period isn’t usually the full length of the term, however – it’s often a matter of a few years after the policy goes into force. It all depends on your specific policy, so read your documents (or call your agent or insurer for help).
If you’re able to convert, that means there won’t be a term to outlive. Permanent policies offer lifelong coverage you can’t outlive. So that removes the issue of what happens to term life insurance if you don’t die. Click here to learn more about the difference between term and permanent policies.
If you convert your term policy to a permanent policy, you won’t have go through the underwriting process again. That means you won’t have to take a medical exam, and the insurer won’t look at your medical records. That’s good news if, by chance, your health has deteriorated since you first bought your policy.
However, since permanent coverage costs more than term coverage, you’re going to see your monthly payments increase. Also, because you’re older now than when you first applied, that increased age is going to push up the price of your converted policy. If you’re considering this option, call your agent or insurer to find out how much your cost would go up and be sure this fits into your budget.
Summary: What happens to term life insurance if you don’t die…and your policy offers an option to convert to a permanent policy? You can maintain coverage, often without the need for a medical exam, at a lower cost than an annual renewable policy. The catch is that you usually need to convert within a limited amount of time, well before your term expires.
Option #4: You buy an entirely new policy.
If you outlive your term but still want coverage, you can also buy a new policy. Insurers create new policies and options all the time, so the options may look different from when you bought your first policy. But since you’re older now, and age plays a big role in the cost of life insurance, your new policy may be significantly more expensive.
You do have options to lower the cost, however. Do you need as much coverage as you did before? If not, dropping the face value of your policy might create a budget-friendly solution. An agent can help you run through the possibilities, with different coverage types and face amounts that meet your current needs. At LifeQuote, we’re happy to help you find a range of options – give us a call at (800) 521-7873!
Summary: What happens to term life insurance if you don’t die…but you still want coverage? If your policy doesn’t convert to a yearly renewable and it’s not possible to convert to a permanent policy, you can buy a new policy.
