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What should I do when my term life insurance policy ends?

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One of the defining traits of the term life insurance is that its policies have an expiry date. Luckily, you may have several options at the end of your term-based policy. You may have the option to either extend the cover, renew your previous policy, or convert it to other forms of life insurance. Outliving your policy doesn’t necessarily mark the end of its value to you or those that you love.

In this post, we discuss your options at the end of the term life insurance policy. Here’s all you need to know about extending your coverage, converting it, or renewing your existing cover.

Extending coverage

A term life insurance policy doesn’t expire until the chosen term elapses.. If you were using a 10-year policy and you live to see its end, you may be able to extend it further if your insurer allows it. Your insurer will only require you to pay the premiums.

Even so, your premiums might change depending on your age, cover amount requested during extension, and lifestyle among other factors.

In term life insurance, the contract involves a unilateral agreement between a policyholder and the life insurance company. The obligation of the contract rests on only one party and that is the cover provider (your insurer).  Your role in maintaining coverage is simply to keep paying premiums as they fall due.

If you no longer need your term-based policy before or after it expires, you can choose to cease paying the premiums. Your insurer won’t punish you or hurt your credit score as is the case with other term-based contracts like bank loans. Your policy will just lapse meaning cover will no longer be available.

If your insurer allows extending a term life cover, you may consider it if you want coverage for a short period, say 3 more years. Also, it may be helpful where you need a non-medically underwritten life insurance policy if you cannot qualify for a new policy owing to changes in your health status.

The downside of using this option is that the cost to keep the policy might increase, sometimes significantly.

Converting coverage

Also known as an exchange, modern term life insurance policies may offer conversion to the whole of life insurance as an option. For example, if you’re above 50, you can choose a favorable cover like the over 50s life insurance.

Different life insurance companies offer varying conversion guidelines based on factors such as:

Specific age

This guides the conversion of a policy up until a specific age, mostly 70 years.

Entire term

This guides a policy conversion at any time within its length of term and before its expiration date.

Period

This guideline provides the timelines within which conversion can occur, for example, within the first or last 3 years of a policy term.

A key characteristic of conversion is that necessary processes and procedures must begin before the term reaches its expiry date. Even then, a smart way to ensure you’re getting a good deal away from the term-based policy is shopping for other policies within your current budget.

The biggest benefit of the conversion of your term-based policy to permanent options is insurability evidence is not necessary. Typically, this is when you wish your coverage amount to remain constant.

Put otherwise, you’re exempted from re-application processes such as reassessment of your health status. Conversion, therefore, is a great option for anyone who has developed severe medical conditions, which might limit qualification to new life policies.

The downside though is that your insurance provider might limit convertible whole of life policies available to you.

Renewing coverage

The least expensive option when your term life insurance policy ends is applying for a new term life policy. The renewal allows you to retain your insurance provider through Exchange or Re-entry provision.

However, it’s worth noting that renewal (same as conversion) is not always available. Ask your insurer whether they offer it as an option and also get to know the terms and conditions before subscribing for a cover. 

Do you have any questions concerning term life or similar life insurance covers? Feel free to ask and we’ll be happy to help.

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