What Happens When Term Life Insurance Expires?

How Long Does Term Life Insurance Last?

Term life insurance provides coverage for a specific period of time, often one, five, 10, 20 or 30 years. (Meanwhile, permanent life insurance generally lasts for the duration of your lifetime.) The life insurance term you choose will likely depend on your age, health and financial obligations. For instance, someone with young children and a mortgage probably needs a longer policy compared to someone with adult children and a paid-off house.

What Happens When Term Life Insurance Expires?

At the end of your life insurance term, the policy expires and you stop paying premiums. This also means your coverage ends, and you won't receive the death benefit any longer.

If you decide you no longer need coverage, you don't need to do anything. Keep in mind, however, that you typically won't get your premium payments back unless you bought a return of premium rider.

Tip: Riders are optional benefits you can purchase for your insurance policy.

If you still need life insurance after your policy expires, you may be able to renew it or convert it to permanent life insurance, depending on what your current policy allows. Otherwise, you can purchase new term or permanent life insurance.

Do I Still Need Life Insurance?

When your term life insurance expires, you're no longer covered by your policy. If you're generally free of financial obligations, this may not matter. But in other cases, such as the following scenarios, you may still have reasons for buying life insurance.

• You have dependents. If you have a spouse, children, parents or other dependents who rely on your income, you may still need life insurance to provide for them if you die.
• You have outstanding debts. If you owe money and don't have the assets to cover your debts, you may still want life insurance. Otherwise, your debt will likely be repaid from your estate, which can reduce your heirs' inheritance.
• You own a business. Life insurance can cover business succession expenses if you were to pass away, preserving the future of your business for any employees and partners.
• You have a high net worth. If you have a high net worth and your family will have to pay estate taxes, your life insurance payout may cover some or all of the bill.

What to Do Before Your Term Life Insurance Expires

If your term life insurance policy is coming to an end, there are several things you can do. But it's important to consider your options before your insurance expires, as it may be too late for some options by the time your coverage lapses.

Here are some choices you have when your term life insurance expires:

• Let your policy expire. If you don't have dependents relying on your income and no longer need life insurance coverage, you can simply let your policy expire.
• Renew the policy. If your policy contains a guaranteed renewable clause, you may be able to renew your term life insurance on a year-to-year basis without getting another medical exam. This may be beneficial if you only need coverage for another couple of years, but you'll likely face higher premiums each year.
• Buy a new term life insurance policy. If you can't renew your policy but still need life insurance, you can also buy a new policy. You may need another medical exam, and your premiums will likely rise.
• Convert your policy to permanent life insurance. If your current policy has a conversion rider, you may be able to convert your policy to permanent life insurance, which lasts the rest of your life. However, the time during which you can make this conversion is usually limited.
• Purchase new permanent life insurance. Alternatively, you can buy a new permanent life policy. Keep in mind that even though permanent life insurance has several benefits, it can be up to 10 times more expensive than term insurance.

The Bottom Line

If your term life insurance policy is expiring, don't panic—there are several options available to protect you and your loved ones. But to ensure security for you and your family, make sure you understand your options well in advance of your policy's expiration date.

First, determine whether you'll need life insurance after your policy ends. If you won't have dependents to support or major debt to repay, you may not need it. In this case, you can let your policy expire. If you still need coverage, you can either renew your policy, buy a new term life policy, or switch to permanent life insurance, depending on what your current policy allows. Keep in mind that any of these options may come with higher premiums, so be sure to factor that into your budget.