What to do when your term life insurance expires

Term insurance is often a good choice for anyone with life insurance needs for a set period of time. Unlike whole life insurance, term insurance has an end date. A person may choose term insurance for a number of reasons. For example, compared to a whole life insurance policy, the premiums are lower, the payouts are straightforward, and it protects your beneficiaries for the time you choose. 

But what happens when your term insurance expires? What should you consider at the end of the term?  Should you renew, convert, or upgrade the coverage? If your needs have changed what insurance options do you have at that time? 

Here’s what you need to know. 

When does term life insurance expire? 

Term insurance expires at the end of your agreement. This can range from 10 to 30 years, in most cases. If you were to pass away during the term, your beneficiaries would receive a lump sum, tax-free payment. This can go towards helping pay for final arrangements and support your beneficiary’s financial needs. The money can be spent on whatever the beneficiaries decide. If you outlive your term there is no payout entitlement. 

When should you start looking at your options?

A few years before your term insurance is set to expire, you should speak to your insurance agent about your options after the term ends. In many cases, renewing before the expiration date is a lot easier than waiting for the term to end. As well, if during the term your situation changes – for example, you have young children or you make a large investment – you should look at upgrading your policy to reflect your new financial reality. 

How to assess your new coverage needs?

When your term insurance is set to expire it’s important to take a deeper look at what your financial obligations are. If you have dependents you may want to increase your coverage before renewal. As well if your salary has increased, you may also want to upgrade your life insurance policy to reflect that. 

The decision to renew your term insurance policy should be based on who your dependents are and how long they will remain financially reliant on your income. 

READ: How much life insurance do I need in Canada?

Converting term life insurance to permanent life insurance

Before your term insurance expires, you will likely be given a chance to covert this to a whole or permanent insurance policy. Before you take this step, find out how your premiums will change. Whole insurance is much more expensive than term insurance. You may now have dependents for life, such as a sick spouse or child. You may also be financially responsible for your grandchildren. Whatever your reason, you can ask your provider about options to be covered in the policy. Check your policy to see if conversion is an option. Often, converting your term coverage to a whole life policy is much simpler than starting a new application for life insurance. 

Can you renew a term life insurance policy?

You can also opt for a renewable life insurance policy that will allow you to continue coverage after your term ends. The biggest advantage of this is it requires no medical exam. This convenience is not cheap – the renewable policy is more expensive than if you took a new policy at the end of your term. 

In most cases, you can easily renew your term life policy. But, there are some exceptions. For example, your policy may have an age of expiry, such as term-to-65 policies.

Purchasing an entirely new life insurance policy, on the other hand, whether it be term or whole life will mean a new application based on your age and medical history. Your premiums will reflect your risk factors based on what you put in your application. 

Cancelling your life insurance before auto-renewal

Sometimes your priorities in life change, and you may not need to continue your term insurance coverage. You’re not locked into your policy. You can call your insurance company and cancel at any time. Just a note, you have no coverage after you cancel, and you could be subject to additional fees. 

The bottom line

Life insurance is an important part of your financial wellness. Make sure you understand what your options are after your term insurance expires, so your loved ones remain protected. If you’re looking to purchase a policy today, be sure to compare life insurance quotes with us to find your best rate today.

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