What Happens If You Outlive Term Insurance?

Personal finance planning involves risk management. That means having insurance covers to cushion you from various risks. There is a wide range of insurance policies in the market, but you do not necessarily need every cover. 


While you might not need extensive knowledge of all the available insurance policies, you must know and understand every aspect of the insurance covers you have. 


For example, life insurance covers come in many forms. It could be a whole life policy, an endowment plan or a term insurance policy. We talked extensively about these life insurance policies (read it here). Any of these policies would suit you, depending on your needs. 


But, unlike a whole insurance cover that only expires after your demise, assuming you keep up with your premium payments, what happens if you outlive a term insurance policy?

What Happens If You Outlive Term Insurance?

Term insurance or pure life insurance is a type of life insurance policy that guarantees financial coverage to your beneficiaries in case of your demise within a particular limited period. For example, if you buy a cover for 10 years and die within this period, your stated beneficiaries will receive the total payout. 


So, if nothing happens to you during the active term of the policy, what happens? What are your options?


Well, if you outlive your term life insurance policy, the coverage will expire, and the payout becomes obsolete. The insurance company retains the premiums you have been paying, and contrary to what some might insinuate, you will not receive any refunds. 


That sounds harsh, I know. Despite this, it doesn’t mean term insurance is not for you. It might not be as superior as a whole life cover, as many experts say, but a term life cover does have its advantages.


For starters, term insurance is one of the simplest and affordable forms of life insurance coverage. Not to mention the tax-free benefits the beneficiaries will receive if you pass on.


Understanding Term Insurance


As the name suggests, you will have to pay life insurance premiums for a specific period, the relevant term. Typically, it ranges between 5 and 30 years. If you pass away during that period, your beneficiaries will receive a lump sum of money. 


The longer the coverage period, the more insurance premiums you are likely to pay. Likewise, the earlier you purchase the cover, the lower the monthly premiums you will have to pay. 


Why? Because at a younger age, you are likely to have fewer medical problems and a longer life span, lowering the chances of a payout by the insurer. Still, premium amounts differ between individuals, even the young ones depending on one’s health status, payout amount and prefered term. 


For instance, you might consider a 30-year term policy at 40 years. Your family’s financial future will be secure upon your demise before age 70. 


If you outlive the age of 70, you are probably debt-free; your kids have grown and can fend for themselves. You have also garnered other financial assets or savings; then, it’s reasonable enough not to keep paying for a policy you might not need.


The problem arises if you outlive your term insurance while your family still depends on you.


Learn more about Individual Retirement Plans vs. Life Insurance Policy; What You Need to Know


What To Do If Your Term Insurance Is Expiring

One of the important aspects of personal finance planning is knowing when payments are due, especially your insurance policies. It allows you to save and make plans for early payments, cancellations or make any necessary changes. 


Don’t wait until the final moments to start figuring out your convenient options. Preferably, make plans a year before your term insurance policy expires. You can choose to:

Renew The Current Term Insurance

Many term policies offer the alternative of extending your term insurance at the end of the initial term. The only issue is that the premiums will be higher than your present ones.


For most insurance companies, a rule of thumb is that the closer they think they will have to pay you, the more expensive premiums will be.


Extending your current term policy is a solid choice for someone having a decline in health. You don’t have to undergo another medical exam to qualify for the insurance policy. Plus, you don’t have to engage in all the hassle of finding a new policy.

Convert To A Permanent Policy

Some term policies allow you to convert your term policy to permanent life insurance. A whole life cover is always more expensive than a term life cover, but it doesn’t hurt to switch if you can afford to pay for it. The premiums will be higher, but you can talk to your insurer for lower premiums and a lower payout. 

Buy A New Policy

If you are in good health and still young, purchasing new term insurance might be affordable compared to the above. Shop around and compare prices and experiences of previous customers. You might get one that’s even more affordable than your current cover. 


The Bottom line

Term insurance cushions the financial interest of your loved ones in case of any life uncertainties. What happens if you outlive a term insurance policy? Well, you lose all the premiums, and you will not receive any payout from the insurer. But it can be an excellent opinion if you are looking for affordable life insurance cover. 


As you plan your finances, ensure you have a plan for your term insurance before it expires. Don’t wait till the last minute to ascertain if you still need the insurance. You can extend it, purchase a new cover, like a whole life cover or forget it altogether.

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