What Happens After Your Term Life Insurance Ends?

Term life insurance provides financial protection for a specific period, or “term,” such as 10, 20, or 30 years. It offers a death benefit to beneficiaries if the insured person passes away within this timeframe. Unlike permanent life insurance, term policies do not build cash value and are designed to cover temporary financial needs. Once the term concludes, coverage typically ceases, prompting policyholders to consider their options.

Options for Continuing Coverage

Policyholders nearing the end of their term life insurance often have avenues to maintain coverage, primarily through conversion or renewal. Many term policies include a conversion privilege, allowing the policyholder to convert to a permanent life insurance policy, such as whole life or universal life. This conversion typically occurs without requiring a new medical exam or health underwriting, which can be advantageous for individuals whose health has declined. However, premiums for permanent coverage are substantially higher than term premiums, sometimes increasing by five to ten times, because these policies offer lifelong coverage and can accumulate cash value.

Alternatively, some term policies offer a renewal option, allowing the policyholder to extend the coverage for another term, often annually. While renewing also avoids new medical underwriting, premiums increase significantly at each renewal period due to the policyholder’s increased age and higher mortality risk. For instance, a policy renewed in one’s 60s could see annual premiums rise by 10% to 20% or more, potentially making coverage very expensive. This option is intended for short-term extensions rather than a long-term solution.

Allowing the Policy to Expire

If no action is taken, a term life insurance policy will expire at the end of its term. When this occurs, coverage ceases, and no death benefit is paid to beneficiaries if the insured passes away after the expiration date. This leaves dependents without the financial safety net previously provided. The absence of coverage could mean a surviving spouse or children would need to find alternative funds to cover living expenses, mortgage payments, or educational costs.

Individuals sometimes choose to let their policy expire because their financial circumstances or needs have changed. For example, their dependents may have become financially independent, or significant debts like a mortgage may have been paid off. Others might let a policy expire due to financial constraints, finding increasing renewal premiums unaffordable. Allowing a policy to expire requires careful evaluation of remaining financial responsibilities and the potential impact on those who depend on the policyholder’s income.

Obtaining New Coverage

Should the need for life insurance persist after a term policy expires, policyholders can apply for a new policy in the open market. This process is distinct from converting or renewing the original policy and typically involves a full underwriting review. The applicant will undergo a comprehensive medical exam, answer detailed health questions, and provide access to their medical history for review by the insurer. This thorough evaluation helps the new insurer assess the current risk level.

The cost and availability of new coverage are influenced by the applicant’s age and health status at the time of application. An individual who has aged or experienced health issues since their previous policy was issued will face significantly higher premiums, potentially doubling or tripling their original cost, or may even be declined coverage if their health has deteriorated. For example, a person applying for a new policy in their late 50s will pay considerably more than they did for a policy purchased in their 30s, even if their health remains good. Applicants can choose between a new term policy or a permanent policy, depending on their updated financial goals and long-term protection requirements.