Q. What are my options for continuing coverage once my existing term life insurance policy terminates?
A. Most term life insurance policies are ‘renewable’ for a period beyond the initial term of the policy (typically to age 95 for newer policies). So, although your policy has a term period of ten years, for example, it may not terminate for many years beyond that, depending on your age. The initial term period of ten years simply means the premiums are guaranteed to remain level for ten years.
So your options at the end of the term period are:
Renew the Policy Annually
Simple; No Need to Provide Proof of Insurability
Convert the Policy
Can Secure Permanent Coverage Without Providing Proof of Insurability
Purchase a New Term Policy
Can Be Less Expensive as Term Rates Have Dropped Significantly
Must Prove Insurability Again
- Renew the policy annually until you no longer need it. This is probably the most expensive option as the premiums will usually increase dramatically from the guaranteed premiums you had been enjoying. However, you will not need to prove your insurability; meaning, if you are no longer in good health, this may be a good option.
- Convert the policy to a permanent policy such as Universal Life insurance. Once again, an expensive option, but you can secure coverage for life without proving your insurability.
- Purchase a new term policy. You may save a bundle with this option but will have to be in good health to get the best rates.