Term life insurance is not an artisanal cheese or a Cabernet Sauvignon: It will not be "mature," no matter how long you have it. The idea that term life insurance is just one of the common misunderstandings regarding what happens at the end of your term.
Whether you are in the researching phase of buying a policy or if you are coming to the end of your term
By definition, the term in term life insurance lasts for a specific period, usually 10, 15, 20 or 30 years. Typically, young families have a policy to protect them during the years when savings are low, and children are financially dependent. During that time, you can enjoy the peace of mind that comes with knowing your family, regardless of your net worth.
Once you've come to the end of your term, you're not out of options. Technically, most term life insurance policies do not expire due to a guaranteed renewability feature, which enables you to lock in your underwriting class and extend your coverage for short periods of time.
your term length is up? Do you get any premium money back? Should you renew your coverage or shop for a new policy?
Simply put, there are two broad outcomes when you buy term life insurance:
If you are the term length of your term life insurance policy…
The value of your policy will be paid to your beneficiaries ̵
If you live through the term length of your term life insurance policy…
The majority of people with term life insurance live beyond the term, which is good news for everybody. For one thing, it makes the price of life insurance very affordable, and for another, still being alive is an important goal for most people.
What happens to the life insurance premiums you paid
Once the term is up on most types of term policies, you do not get back the premiums you have paid. That's why life insurance is so affordable. Much like your car, pet or interest insurance, you pay the premiums and you will never need to use it.
There are term policies out there called "return of premium" that may seem like an attractive option because you get back the premiums you've paid. However, these types of policies cost much more than your typical level term policy. Confusing? Yes, we agree. For example, a 35-year-old man can buy a 30-year, $ 500,000 Port Term policy issued by MassMutual starting at about $ 41 per month. (That's a medically underwritten, level-term policy.) A return of premium policy for the same man and the amount of coverage would cost about $ 120 per month, according to State Farm.
Not only does this higher premium mean less money in your pocket every month, it also returned to you at no interest.Naysayers proclaim it's extra money of yours that is given to insurers to hold onto and invest for its own gains.
We say: Buy more affordable term life insurance coverage and use the difference to build an emergency fund or grow wealth.
Three options for an expiring term  What if your term ends and you want to be insured for longer? If your policy has guaranteed renewability, you can maintain your underwriting status and extend your coverage for short periods of time. You can usually renew the policy for one year, which gives you time to consider your options if you want coverage for longer. Be aware that those options will involve paying more than you used to. As you get older, life insurance premiums become considerably more expensive, which is one reason it is important to purchase the right amount – and length – of coverage when you first get life insurance, so you can lock in a low rate while you're young and healthy.
Ideally, you've chosen long term term so that when your policy ends, you don't need it anymore (your kids are grown, your mortgage is paid off), and you don't have additional purchase at greater cost. Use the Haven Life Insurance calculator: It's free, easy to use, and could help save your money in the long run.
If your life insurance term is expiring, consider these three Options:
first Letting the coverage end
If you are no longer needing coverage, then congratulations! There are two reasons to celebrate. You are living a long, full life, and you're financially healthy.
There is no reason to feel guilty or worried about your term life insurance coverage. It's meant to keep you over and help financially protect your family when there are little ones in the house and before you have spent years and years saving for retirement and the unexpected. (But, you can check your life insurance right here just in case.)
Enjoy the extra money in your bank account, and make sure that those little-turned-adult ones know how important coverage is when they have a young family of their own.
2. Renewing your current coverage
Typically, you can renew the policy for one year and then revise your needs and renew again a year later under a guaranteed renewability commission. This can take some time so that you are not covered by a better option.
Extending your term policy comes at a cost, though. In fact, your premiums will be exponentially higher than the low rate you enjoyed during the policy's original term. And, the price will increase each year you renew. If you are a policy, insurers are assuming that you are paying the highs because you can't qualify for medically covered coverage – which could be true.
So why would anyone want to do this? For starters, you can extend your coverage without going back through the underwriting process. If you are not in great health or have suffered from a significant illness during the term length, renewing your policy may be the only option for maintaining the amount of coverage you currently have. But if you are looking for a year or a lifelong solution, the extension is not the way to go.
Extending your policy might make sense if you:
- dependents will be around for a short period (say a year or two).
- Are unhealthy or have chronic health issues that would prevent you from qualifying for medically underwritten or simplified issue coverage.
- Need to maintain a significant coverage amount such as $ 500,000 or more.
3. Buying a new policy
If you need to buy a new policy, the type of coverage will depend on your coverage needs, your age and your health.
Status: You are healthy and / or more than $ 100,000 in coverage
If you're in your 40s, 50s or even early 60s, purchasing a new, medically underwritten policy is still a great option. You can buy more substantial rates and get more affordable rates than you can with simplified issue or guaranteed issue policies.
A good place to start is to first, ensure you really need coverage. We don't want you paying for coverage you need. Use an online life insurance calculator, which can look at your age, your debts and your financial dependence on a policy amount.
Once you have decided you need coverage, you will go through the application and underwriting process. For a Port Term policy, that means:
- Share a little bit about yourself online to get your real rate.
- Choosing a coverage amount and term length based on what you're willing to pay per month.
- If you are 45 or older, take a medical exam to verify your self-reported health information. If you're 44 or under, a medical exam may not be needed for final coverage, depending on health information in your application .
Status: Not very healthy and seeking coverage up to $ 250,000 (or more)
It's always smart to shop around and price compare. The right policy for you will depend largely on how much coverage you need for the time you need coverage
If you are under $ 250,000 and you are looking for a longer term, a simplified issue policy is worth checking out. These types of policies require a minimum amount of health questions and do not require a medical exam which makes them a good choice for less healthy individuals. Keep in mind, you'll pay more for the added risk of insuring that your full health picture and coverage is usually capped at $ 250,000.
until your mortgage is paid off) and are the most expensive option but probably the best option.
Either way, it is good to compare your renewability rate with what is new, medically underwritten policy would cost, or to what a simplified issue policy would cost. This way, you ensure you're getting the best value.
Status: You are applying for a policy of end-of-life expenses and debts
If your term policy is expiring and you have not qualified for simplified issue life insurance, but you want to have some coverage in place to help protect your loved ones, then a guaranteed issue life policy that is not medically underwritten. This type of coverage is designed to help cover final expenses – things like funeral costs, medical bills and credit card debt. The coverage level is usually capped at $ 25,000 or $ 50,000 depending on the insurer. A guaranteed issue policy is usually purchased by older, less healthy individuals, so premiums can be quite a bit higher. For example, a 60-year-old man might pay around $ 150 per month for $ 25,000 in coverage.
policy may be better fit. And, you are limited to $ 50,000 in coverage. Our parent company, MassMutual, sells whole life insurance and can be a resource for purchasing and pricing.
An expiring term means it's time for a reset
If you have a term life policy with an expiring term that means you We have been the cover of you to protect your family from the unexpected – which is always cause for celebration. Now it's time to assess where you need to go forward
If your policy term is set to expire in the next year, you have great timing. With time on your site, you're sure to get the best value. Start at reading through your policy to confirm it offers guaranteed renewability (or call and ask the friendly customer service folks.) When you know and assess your life insurance needs, you can find the best course of action for you and yours.
Michael Davis is a freelance writer and editor who has covered everything from fashion and music to parenting, work, and finance. He has been a chef, restaurateur and record label owner.
Haven Term is a Term Life Insurance Policy (ICC17DTC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111 and offered exclusively through Port Life Insurance Agency, LLC. Policy and rider numbers and features may vary by state and may not be available in all states. In New York, Harbor Term is DTC-NY 1017. Our Agency license number in California is OK71922 and in Arkansas, 100139527.