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What Happens When a Term Life Insurance Policy Matures
What happens when a term life insurance policy matures? It means the term has been completed and your coverage ends. The good news? There are multiple ways to continue that coverage, but the earlier you act, the better.
Here’s What Happens When a Term Life Insurance Policy Matures
Term life policies cover you for a limited period of time. And when that limited period of time runs out, your policy can be said to have “matured.” In insurance-speak, that just means your policy has completed itself. And when that happens, your coverage is over.
Unless you take special action, you will not have coverage past the end of your term. In many cases, your insurer (or your insurance agent) will notify you before this happens…but not always. It’s really up to you to be aware of your term’s ending date and be aware of your options if you want to continue having coverage. We’ll go over your three options below.
Want to talk to a real person about your life insurance options? We’re here for you. Call us at (800) 521-7873 for customized advice, or click the button below to get a free quote for a new term life policy.
Option #1 to Continue Coverage: Annual Renewals
Most term policies have an option to continue coverage on an annual renewable basis. The insurance company will not automatically select this option for you – you’d have to contact them, ask about your policy’s specific options, get a price for that renewal, and decide if you want to accept it.
A one-year renewal can work in a pinch, if you still have financial obligations you need to cover. However, it’s not an ideal solution for the long term. That’s because every time you renew a policy, the insurance company is going to increase your rate. You won’t have to take another medical exam, but they are going to look at your age and adjust your premium accordingly. And if you had, say, a 30-year term, you’re quite a bit older now than you were when you bought your policy.
As a result, you can expect annual renewal payments to be significantly higher than your original payments. If you know your needs only call for another year or two of coverage, this option can work – but we also suggest you price a brand-new term policy for, say, five years. If you’re in good health, it may actually be cheaper to start with a new policy.
Want to talk about what happens when a term life insurance policy matures? Call us at (800) 521-7873 for customized advice, or click the button below to get a free quote for a new term life policy.
Option #2 to Continue Coverage: Conversion
Your second option to continue coverage is a conversion. Most – but not all – term life policies include an option to convert that policy to a cash value policy that lasts your whole life. There are usually time limits on these offers. For example, your policy may allow seven years from the time of purchase for a conversion.
Every insurer sets their own rules with regard to conversion options. If you’re not sure what your policy offers, call your insurer or your insurance agent. This is another reason why it’s really up to you to know how long your term lasts and what your options are, along with any deadlines.
In most cases, you won’t have to take a medical exam to convert a term policy into permanent one, but you will have to pay a higher rate. That’s because you’re older now than when you bought your policy, and the cost of covering you has gone up. The insurer is going to re-evaluate your age before giving you a rate for your new permanent coverage. Despite the extra cost, conversion can be an especially good option if you’ve developed health issues and don’t think you could qualify for a brand-new policy.
Want to talk about what happens when a term life insurance policy matures? Call us at (800) 521-7873 for customized advice, or click the button below to get a free quote for a new term life policy.
Option #3 to Continue Coverage: Buy a New Policy
Your third option to continue coverage is to buy a brand-new policy. At this point, you want to think hard about your options. How much longer do you need coverage? How is your health? What kind of budget do you have? When you have a handle on the answers to those questions, you can choose from these three options:
- Buy another term policy. If you know you don’t need coverage that lasts for the rest of your life, another term policy can meet your needs. Consider how much longer your financial obligations will last, and shop for terms that offer you enough time to complete those obligations. Consider what might happen if those obligations last a little longer than you expect. Maybe your retirement gets put off a year or two, or maybe a child doesn’t leave home for an extra couple years. When in doubt, look for a slightly longer term than you may need so you don’t have to repeat this process later.
- Buy a cash value policy. You may decide you want coverage that will never expire this time. If that’s the case, you only want to consider whole life, universal life, or variable life. Each of those policy types cover you until you pass away – that’s why they’re often referred to as permanent policies. The simplest of these is whole life, but if you are looking for investment components or the chance to grow your cash value faster, universal or variable life have those options. They’re more complicated than whole life, so it’s best to talk to an agent to make sure they’re right for you.
- Buy a no-exam policy. If you have health issues or just don’t want to bother with the life insurance medical exam, look for what we call a no-exam policy. It’s the same coverage you want (term life or whole life), only without the exam. Instead of getting health information about you from the exam, the insurer will look up information about you in national databases. These include details about your medical history, prescription history, and even your driving history. The insurer uses that information to assess how much of a risk you would be to insure, and assigns you a rate class and a price. Most of the time, you’ll pay a little extra to skip the exam, but it may be worth it if it means you can get covered faster.
Keep in mind that, no matter which policy type you apply for, that policy will cost more than your first one because you’re older. If you’ve developed any health issues since your first policy purchase, those are going to raise your rate, too. In general, that’s why we always advise clients to buy coverage for the longest possible term they think they might need (or opt for lifelong coverage).
And that’s what happens when a term life insurance policy matures. Wondering what you should do to continue coverage? Call us at (800) 521-7873 for customized advice, or click the button below to get a free quote for a new term life policy.
