What Happens After 10-Year Term Life Insurance Expires?

A 10-year term life insurance policy provides financial protection for a specific period, typically a decade. It offers a death benefit to named beneficiaries if the insured individual passes away within the 10-year term, provided premiums are consistently paid. This coverage often aligns with financial obligations like a mortgage or raising young children. As the policy approaches expiration, policyholders face several decisions regarding their future life insurance coverage.

Automatic Renewal

Many 10-year term life insurance policies include a “guaranteed renewability” feature, allowing extension without a new medical exam or underwriting. Premiums typically increase significantly upon renewal. This increase occurs because the new premium is based on the policyholder’s attained age, reflecting the higher mortality risk associated with being older.

The renewal often transitions the policy to an annually renewable term, meaning premiums will continue to rise each subsequent year as the insured ages. This option can serve as a temporary bridge for individuals who need immediate, uninterrupted coverage but have not yet decided on a long-term strategy. While convenient, relying on automatic renewal can become financially burdensome over time, making it the most expensive approach for sustained coverage.

Converting to Permanent Coverage

The “conversion privilege” allows policyholders to convert their term policy into a permanent life insurance policy, such as whole life or universal life. This typically does not require a new medical exam or additional underwriting, even if health has declined since the original policy was issued. This can be advantageous for individuals who have developed health conditions that might make obtaining new coverage difficult or expensive.

Converting provides guaranteed coverage for the remainder of the insured’s life, as long as premiums are paid. Permanent policies also accumulate cash value on a tax-deferred basis, which can be accessed later through loans or withdrawals. However, premiums for permanent coverage are higher than those of the initial term policy, reflecting the lifelong coverage and cash value component. Death benefits from life insurance policies are not subject to federal income tax for beneficiaries when received as a lump sum.

Purchasing a New Term Policy

Instead of renewing or converting, a policyholder can apply for an entirely new term life insurance policy. This process involves new underwriting, including a review of the applicant’s current health and lifestyle. It requires a new medical examination, blood and urine samples, and detailed health questions. New premiums are determined based on the policyholder’s current age, health status, and other risk factors, such as gender, occupation, and family medical history.

If the policyholder has maintained excellent health, they might secure a new term policy with premiums comparable to, or even lower than, the rates offered through automatic renewal. Conversely, any deterioration in health since the original policy was issued could result in significantly higher premiums or even a denial of coverage. Comparing quotes from multiple insurance carriers is advisable, as underwriting criteria and pricing can vary significantly among providers.

Letting the Coverage End

A policyholder may choose to let their 10-year term life insurance coverage simply expire without renewing, converting, or purchasing a new policy. In this scenario, the coverage ceases, and the policy no longer provides a death benefit. If the insured individual passes away after the policy’s expiration date, no payout will be made to the beneficiaries.

This decision is often considered by individuals whose financial circumstances or needs have changed. For example, if dependents are now financially independent, significant debts like a mortgage have been paid off, or sufficient assets have been accumulated to cover final expenses and provide for loved ones, the need for life insurance may diminish. While this option eliminates future premium payments, it also means the complete loss of financial protection that life insurance provides.