The biggest advantage of term life insurance is that it’s affordable. It provides the greatest possible protection for the lowest monthly premium.
Most people buy term life insurance to protect their families for 20 years or so, or until the children are grown. Term life is often the most cost-efficient solution for these temporary protection needs.
But what happens when your term policy is about to expire and you still need life insurance protection?
The answer depends on your situation and health. Most people fall into one of these categories:
1. You just need term protection for a few more years.
You may be able to keep your existing policy in force, though at a higher premium. Look at your policy documents. Most policies are guaranteed renewable, which means that as long as you pay premiums, you cannot be turned down, regardless of your medical condition or history.
Your premiums will go up to reflect your age, but you won’t need another medical exam. Term premiums usually remain very affordable for most people well into their 40s and even 50s.
The disadvantage of simply extending a term policy is that premiums continue to increase as you get older. Extending your original term policy is usually workable for a few years. But eventually, term insurance premiums become unaffordable. However, you may be able to reduce premiums by lowering the face amount.
Tip: If you smoke, consider quitting the habit at least a year before your policy comes up for renewal. This way, you may qualify for lower non-smoker rates.
2. You need protection for a longer period of time.
Many people want or need life insurance much later in life, or even permanently. This can happen for many reasons, including:
- Children later in life
- Custody of grandchildren
- Final expenses
- Estate tax liability
- Savings are insufficient to protect survivors
- Desire for cash value to supplement savings.
If you think you may need life insurance for longer than a few years after your current term policy expires, consider a permanent policy, such as whole life or universal life insurance. These policies are designed to last as long as you do provided you can keep up the premiums.
They also build cash value, which you can use to supplement retirement savings, help with college savings for a family member, or for any other purpose.
3. You are in poor health.
If your health is poor, you might not be able to buy a new life insurance policy at affordable prices. If you have a guaranteed renewable term policy, you may want to consider keeping it in force as long as you can. If that’s not possible, some carriers allow you to convert your term policy to a smaller permanent policy, suitable for final expenses.
Note: There’s usually a limited window of time to exercise your conversion. Check the language in your policy.
If you have more questions about life insurance, or would like a free complimentary review of your current policy, please feel free to reach out to us today! 970-460-9895