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What happens when a lifetime policy expires? • The insurance pro blog



When a life expires, the original premium payment agreement expires and now the insurance owner must either pay a higher premium or find another life insurance. The overwhelming majority of life insurance policies issued today are the level. These insurances have a guaranteed level of payment period. Maturity occurs at the end of this level payment period. When this happens, most policyholders allow coverage to continue, but at a significantly higher premium.

Example of 20-year policy before and after maturation

We use a male age 45 in our example who is looking for a death benefit of 1 million dollars. With a major life insurer, the 20-year guaranteed premium is $ 1415 per year. He can pay the same annual amount for 20 years and he will keep his death benefit of $ 1

million. After year 20, his guaranteed level period expires and his new premium in year 21 jumps to $ 45,095. Here is a general ledger describing the premium increases:

  Examples of 20-year level costs Here you can see that this coverage becomes significantly more expensive when the guaranteed level expires. The insurance owner is free to continue to insure and continue to pay the new (much higher) premium. He will retain his $ 1 million death benefit coverage if he continues to do so.

Alternatively, some companies now issue sight policies that maintain the premium level even after the guaranteed level, but they adjust the death benefit to an amount that this smaller death benefit would buy at the insured's recently reached age. Here is an example of how this works:

 Example of reduction of death level at level

In this case, death benefit of 1 million USD $ 1240 per year. After the 20th year, the premium is the same, but the death benefit drops to $ 52,562. The insurance owner has the opportunity to keep his coverage to this new lower amount and pay the same premium. But notice that eventually the premium also increases on this smaller amount of death.

Do you get your money back when your term expires?

You will not get your money back when your term expires. Life insurance with a long life does not offer a benefit for confiscation and therefore does not give the insurance owner any of his money back on the due date. / she had life insurance cover which would have protected his / her loved one's financial interests if he / she had died.

In certain limited situations there is an option to purchase a refund of Premium life insurance. This specialized form of life insurance offers to give all premiums back to the insurer if the insured does not die below the guaranteed level. This product comes with a higher premium cost than traditional level period insurance.

But if you do not have a refund of premium insurance, you have reached the end of your level period and you choose not to continue paying the much higher premium, your death benefit coverage ends and you get no money back.

Are you going to convert to permanent life insurance?

For those who have the opportunity to convert a lifetime policy to a permanent life insurance, this may or may not be a good idea for those approaching the end of their lifelong insurance period.

Conversions are an option that some life insurance companies make available in their lifetime policies. They allow insurers to change their term insurance to a permanent life insurance policy (such as a lifetime or a universal life insurance policy) without going through the application process for the permanent insurance policy.

If you want to keep your death protection, and applying for new coverage is not an option, then it is probably the best option to convert to a permanent policy.

However, you should understand that not all conversions are the same size. Some companies limit the permanent product options that a term policyholder has when exercising the conversion function. You should understand what type of insurance you can convert to and whether they guarantee the death benefit with the new premium you pay.

Can You Survive Affordable Life Insurance

When you buy a life insurance policy in the long run, you should plan for the eventual reality that you can survive a period of buying affordable life insurance. As you age and the overall probability of your eventual death increases the price of life insurance accordingly. For a healthy young individual, the probability of death is small, and as such, the cost of life insurance (especially life insurance) is very low.

But with each passing year, the probability of dying goes up a bit and the cost of a new life insurance policy also increases to account for this. Eventually, you will probably reach an age where it is unaffordable to buy a new life insurance policy. If you choose a life insurance policy that is only intended to be temporary, you will lose your coverage before the probability of death becomes high. Planning for this possible circumstance is a basic requirement of the buying period and invests the difference philosophy.


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