My Term Life Insurance Policy is About to Expire... What are my Options?

As the expiration date of your term life insurance policy approaches, you might be wondering what steps to take next. This is an ideal opportunity to reassess your financial priorities and ensure your loved ones remain securely covered for the years to come. If it’s been a while since you checked your policy’s expiration date, use this as your reminder.
A term life insurance policy typically lasts at least 10 years, and your financial position can shift significantly within that period of time. Maybe you’ve had children, gotten married, built a new home, or welcomed grandchildren. No matter your current circumstances, now is an excellent time to review the remaining duration of your term policy and explore your options for the future.
Understanding term life insurance
Term life insurance provides coverage for a certain period of time between 10 and 30 years. If you pass away during the specified term outlined in your policy, your beneficiaries will get a cash payout known as a death benefit. Your beneficiaries can use that payout to cover various expenses that you were once responsible for paying. This could include mortgage payments, car payments, student debt, or even to save for the future. There are several term policies available, and most offer benefits like return or waiver of premiums, accidental death benefits, and “riders” that allow your spouse or child to be included under the same policy. Your chosen beneficiaries on your life insurance policy(ies) should be kept up to date to ensure that your coverage accurately reflects your current wishes.
What to do when your term life insurance policy is expiring
If you are still living when your term policy nears its expiration date, there are a few things you can do to keep your coverage active. First, you should contact your insurance provider or agent to be educated on your options. Most term life insurance policies offer the choice to renew your coverage or convert to a permanent policy. However, some term policies may have restrictions and specific rules when it comes to renewing or converting your coverage.
An important thing to remember about life insurance is that each policy is evaluated individually, so the options available to others might not be the same for you. The underwriting process for any type of insurance, especially life insurance, can be complex and tedious. It might be smart to review your policy before meeting with your agent to refresh your mind about your coverage details.
Option 1: renew your term policy
Most term life insurance policies include renewal options. This means that after your initial term policy expires, you have the choice to renew the policy yearly. A few upsides to renewing your policy is that you get to keep your current coverage, your benefit amount won’t change, and you likely won’t have to get a medical exam to re-qualify for coverage. The downsides are that your premium is annually increased based on your age, making this a higher cost option. Term policies are generally renewable until age 100.
Option 2: convert to a permanent policy
Your term life insurance policy may offer the option of converting to a permanent policy. An advantage of converting to permanent coverage is that you may not be required to go through the underwriting process again and your coverage won’t expire, as long as you’re still living and paying your premiums. A downside to this option is that your rate will likely increase since permanent coverage is typically more costly than term coverage. You might be paying more, but you can have coverage for the rest of your life. Most term life insurance policies have a maximum conversion age of 65, regardless of the policy’s expiration date. Make sure you know the maximum conversion age of your term policy.
Depending on your term policy type, there may be a specific conversion period. The conversion period could be anywhere from 2 years to 30 days before the policy’s expiration date. If converting to permanent coverage is something your term policy offers, be sure to communicate this with your insurance agent so you don’t miss any deadlines.
Option 3: purchase a new term policy
When your term policy nears its expiration date, it may be an option for you to purchase a new term policy. This allows for more flexibility in choosing your desired coverage length and policy type. However, not everyone has this option—there are requirements you must meet in order to qualify for a new policy. Treat this option as if you were getting life insurance coverage for the first time; your health, age, and risk must all be assessed to qualify for approval of coverage. You will have to go through the underwriting process again, and your rate will likely increase based on your health and age. Most term life policies have maximum issue ages of 50-70, so if you’re above that range, this may not be an option for you.
Other factors to consider
Deciding what to do with your expiring term life insurance policy is a big deal, and it affects the future of your beneficiaries. It’s important to thoroughly consider all factors so that you can be confident in your decision.
Your health
Your current health and medical history can play a role in determining your options. If you’re still in good health, you might qualify for a new term policy. If your health has declined, converting your term policy to a permanent policy might be a better option for you.
Your age
As you get older, you become higher risk, as well as more expensive to insure. Your age can greatly impact your options of what to do with your term policy when it expires.
Your income
Think about your savings, investments, or other form of financial security your loved ones would be left with. It’s important to not go without life insurance coverage, even temporarily. While savings can act as supplemental coverage to life insurance, remember that it may not be enough to replace your income at death.
Your dependents
If your kids are grown and have families of their own, you may decide that you don’t need as much coverage as you once did. If you still have loved ones who fully depend on you financially, evaluate their needs for the foreseeable future to make sure they would still be adequately covered.
Each policy and policyholder are different, which affects your options. Don’t wait until the last month before your term policy expires to make a decision; instead, have a plan and understand your options ahead of time. Before making any adjustments to your life insurance coverage, keep your beneficiaries in the forefront of your mind.
The importance of reviewing your insurance coverage
Your needs and priorities change over time, which is why it’s important to make sure you have the coverage you need. When it comes to life insurance, think about the legacy you want to leave your family. Let’s say you bought a 30-year term life insurance policy around age 35. You’re now in your early 60’s, and you decide to review your insurance policies. Your term policy expires within the next few years and if it weren’t for your review, you might have forgotten. Since your needs have changed over the last 30 years, you call your insurance agent to discuss next steps. Whether you’ve gone through a major life change, need more coverage, or you’re interested in learning more about the benefits other policies offer, your agent can guide you in the right direction.
It's essential to review all of your insurance coverages annually to ensure they still meet your needs. Reviews not only refresh you on your current coverages but also remind you of how much time your term life insurance policy has left.
It’s wise to talk to your insurance agent if you have specific questions about your coverage. When it comes to protecting your loved ones, understanding your options is very important. Call your local Alfa® agent to discuss your insurance needs or get a free life insurance quote here.
*This is not an insurance policy. It is intended only to provide a general description of Alfa Insurance® and/or its product lines and services. An actual policy contains the specific details of the deductibles, coverages, conditions and exclusions. Your Alfa® agent can explain the policy and benefits and answer any questions you may have before you buy.