When does term life insurance end?
Term life insurance explained
As its name suggests, “term” life insurance is temporary. It covers a period of time (or term) that’s generally between five years and 30 years. When the term ends, the coverage ends, although in some cases you may be able to continue the policy on a year-to-year basis if you’re willing to pay a higher premium, since term life insurance rates go up as you get older. (Another option is to convert your policy to “whole life,” which we’ll discuss below.) The reason term life insurance is generally less expensive than “permanent” or “whole life” insurance is because fewer years of coverage mean less risk for the insurance company. Your family may or may not need to collect on a term life policy, whereas if you have a policy for the rest of your life (which is what “whole life” and “permanent” insurance offer), the company knows there will come a time when it will pay a death benefit to your loved ones.
What’s the point of temporary life insurance? If you have a young family and lots of bills, the lower cost of term life can be the difference between being able to afford insurance and having to put it off. In fact, term life is designed to help budget-conscious families add a sense of financial protection during the years when their expenses are at their highest due to what are known as (but don’t feel like) “temporary expenses” such as mortgages, car payments, childcare, and the many other costs of supporting a family. Those years are also generally the time when losing you and your income would cause the most hardship for the people you love.
Why term life ends
Depending on the term you choose, your term insurance may end by the time you’re fifty, sixty, seventy, eighty or somewhere in between. By that point, your kids will probably be grown and supporting themselves. You might have paid off your mortgage and eliminated other major debts. With fewer or smaller debts and financial responsibilities, there’s less need for the kind of coverage term life insurance offers. Your term policy has served its purpose.
Some term policies will cover you past age 80. However, these policies may cost so much compared to how much they pay out that you might want to put that money into savings or explore a different kind of life insurance policy.
Life insurance after your term life policy ends
Your term life insurance will end, but life insurance doesn’t have to. In many cases there are good reasons to continue your coverage. For example, you might want to make sure your loved ones don’t have to pay for your final expenses or your end-of-life medical care. You might have a child or relative who still requires financial support. Or you might want to leave money to one or more loved ones as an inheritance.
If you’re still in your fifties or sixties (or younger), consider switching to a conventional whole life policy, which offers lifetime coverage. Many term life policies offer the option to convert to whole life. But it’s important to take advantage of that option before your term life policy expires.
Life insurance for seniors who are older and have health issues is also available in the form of guaranteed acceptance whole life insurance.* Although these policies tend to cost more than a regular whole life policy, the advantage is that you can’t be turned down due to your health. Like regular whole life, guaranteed acceptance whole life covers you for the rest of your life.
You have options
Now is a good time to think about how long to keep term life insurance and when to possibly convert your policy. The earlier you decide what’s right for you, the more options you’re likely to have and the lower your premium payments are likely to be. So don’t put it off.
Still have questions? Interested in a life insurance quote? Contact TruStage® today.