What Happens If You Outlive Your Term Life Insurance?

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Term life insurance is a straightforward and cost-effective way to provide financial security for your loved ones in the event of your passing. 

But what happens if you outlive the policy term? Here, we’ll explore the implications of outliving your term life insurance, the options available to you, and the steps to consider for continued financial security.

What is Term Life Insurance?

Term Life Insurance is a life insurance policy with a specific duration and coverage amount. It pays a lump sum to the beneficiaries if the policyholder passes away within the specified term.

It is designed to provide financial protection when the insured’s loss would pose a significant financial strain, such as while raising children or paying off a mortgage. 

Explore further and find answers to any queries by reading our in-depth articles “What is life insurance?” and “Questions about Life Insurance You Always Wanted to Ask.

What should I do if my life insurance policy is expiring?

If your term life insurance is nearing its end and you find yourself still needing coverage, there are some options to consider:

Purchase a new life insurance policy

When considering purchasing a new life insurance policy after an existing one expires, it’s important to understand how age and health can impact premium costs and eligibility. 

Take the example of John, who initially bought his term life insurance policy at age 25 when he was in good health. Due to his young age and lack of health issues, he secured a very affordable premium at that time.

Now, as John’s policy is set to expire, he finds himself at age 50, contemplating the purchase of a new policy. However, several factors now complicate his ability to find similarly affordable coverage:

Age Factor: Life insurance premiums naturally increase with age because older individuals are statistically closer to mortality and often have more health issues. Thus, the premiums John faces now at age 50 will be significantly higher than what he paid at age 25.

Health Considerations: If John has developed any health issues since he first purchased his policy, these will further inflate his premiums. Life insurance providers assess risk based on current health conditions, and pre-existing conditions like diabetes, heart disease, or even high blood pressure can dramatically increase the cost of premiums.

Risk of Denial: Depending on the severity and nature of his illnesses, John’s coverage could be denied altogether. Certain conditions pose a high risk to life insurance providers, and as such, they may opt not to offer coverage.

Given these challenges, John must carefully consider purchasing a new life insurance policy. 

He should compare offers from several insurance providers to find the best rates and coverage options available for someone in his age group and with his health profile. 

Additionally, consulting with one of our financial advisors at LowQuotes, who specialises in high-risk coverage, could provide John with more tailored options that better suit his specific circumstances.

Extend the coverage of your life insurance policy 

When planning for long-term financial protection with life insurance, one valuable feature to consider is the conversion option

This optional benefit allows you to extend the coverage of your life insurance policy beyond its original term without providing further medical evidence. 

Essentially, this feature enables you to convert your term life insurance into a new policy for an additional term, offering continued coverage even as your circumstances change.

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Example of Using the Conversion Option

Imagine Sarah, who purchased a term life insurance policy at age 35. Her policy was set to expire at age 65, aligning with her planned retirement age. 

When she initially bought the policy, Sarah was in excellent health, which helped her secure low premium rates. However, as the expiration of her policy approaches, Sarah discovers she has developed a chronic health condition. 

If she were to apply for a new policy now, this new health issue could significantly increase her insurance premiums, or worse, it could lead to the denial of coverage altogether.

Fortunately, Sarah had the foresight to choose a policy with a conversion option. As her policy nears its end, she decides to use this feature to extend her coverage. Here’s how it benefits her:

No Medical Exam Required: By opting to convert her existing policy, Sarah can extend her life insurance coverage without undergoing a new medical examination or providing any other proof of her current health.

Continuous Protection: This conversion ensures that Sarah remains protected by life insurance despite her new health condition, which might have made it difficult or impossible to obtain new coverage elsewhere.

Peace of Mind: Knowing that she can maintain life insurance coverage gives Sarah and her family added security and peace of mind, knowing they are protected financially regardless of her health.

Conversion Option conditions

The conversion option comes with specific conditions that must be met:

Coverage Limit: The coverage amount under the new policy cannot exceed the coverage amount of the original policy.

Premium Determination: The premiums for the new policy will be calculated based on your current age, smoking status, and the prevailing rates at the time of conversion for the chosen plan. Additionally, any special terms that were included in your original policy will carry over to the new policy upon conversion.

Insured Parties: The individual(s) covered under the new policy must be the same as those covered under the original policy.

Policy Conditions: The new policy will adhere to the standard terms and conditions applicable to that type of policy at the time of conversion.

Is there an alternative option?

In addition to the options previously mentioned, we highly recommend considering a whole of life insurance policy.

Whole of life insurance is a permanent insurance policy that covers you for your entire lifetime rather than a specified term. Upon your passing, it provides a lump sum payment to your family or dependents.

If you’re in the market for a life insurance policy, you might want to consider whole of life cover as a permanent solution that ensures protection throughout your lifetime. 

With this type of life insurance, you can have peace of mind knowing that you and your family are continuously covered, regardless of when you pass away. It also eliminates the need for extending term coverage and provides enduring security for your loved ones.

Whole of life insurance is also attractive to individuals looking to protect their assets from inheritance tax.

Consult with one of our financial advisors at LowQuotes to receive guidance and make informed decisions.

Can a mortgage protection policy be converted into a term life insurance policy?

Yes, you can use the conversion option for mortgage protection. This feature enables a client to transition their mortgage protection policy into a life insurance policy.

Learn more about the differences between life insurance and mortgage protection.

Get a life insurance quote with LowQuotes

If you’re considering life insurance to protect your loved ones, consider getting a quote from LowQuotes. At LowQuotes, we make it easy for you to find a policy that suits your needs and budget. 

Whether you’re looking for term life insurance, whole of life coverage, or a specific plan tailored to your circumstances, LowQuotes provides the tools and information you need to make an informed decision. 

Additionally, read our article, The Benefits You Can Enjoy From Life Insurance While Alive and Common Myths And Misconceptions About Life Insurance.

We also provide a wide variety of financial services, such as mortgages, serious illness cover, pensions, financial planning, health insurance, and savings & investments

Compare all providers and get covered in under 10 minutes!

All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.

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