Does Term Life Insurance Expire?

Life insurance can provide peace of mind for anyone worried about what happens to their loved ones after they die, but finding the right policy can be challenging. It can be difficult to choose how much coverage you need, whether to opt for a whole or term plan, and if you’ll need to add any riders. If you’re considering a term life insurance plan, one question that often arises is: Does term life insurance expire? In this article, we’ll answer that question and explore options for policyholders who may want additional coverage.

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What Is Term Life Insurance?

Term life insurance is a type of life insurance policy that guarantees a death benefit payout if the insured dies during the term specified in the policy. Unlike whole life insurance, this type of plan doesn’t include a savings component and typically holds no value beyond that of the death benefit.

Term life premiums are based on the policy’s value, and individual risk factors such as age, gender and overall health. Additional considerations may include family medical history, occupation and hobbies, and your driving record. A medical examination may be required for underwriting.

Types of Term Life Insurance

Not all term life insurance is the same, and the policy you choose should depend on your individual needs and budget. Term life insurance may fall into the following categories of plans:

• Level term: Level-term life insurance policies provide coverage for a predetermined period of time. The premiums and death benefit of a level-term policy are fixed over the lifetime of the plan.
• Yearly renewable term: Instead of offering long-term coverage, this type of policy is designed to be renewable each year. Policyholders don't need to provide additional evidence of insurability upon renewal, but the premiums usually increase as the insured individual ages.
• Decreasing term: The death benefit payout of a decreasing-term policy declines each year based on a set schedule, although premiums typically remain fixed throughout the life of the policy. A decreasing-term plan is often purchased to cover a mortgage or other installment loan, with coverage terms set to match the payment terms of the debt.

Does Term Life Insurance Expire?

Yes. Term life insurance expires at the end of the contracted term, which is determined when you purchase the policy. Plans typically range from five to 30 years and issued in five-year increments, although yearly renewable term plans expire at the end of their yearly term if not renewed. Term policies may also be purchased to end at a certain age, which is often 65.

How Long Can You Keep Term Life Insurance?

How long you can keep your term life insurance policy depends on several factors, which should be specified in the contract. That may include the following:

• Term length: The driving factor when it comes to how long you can keep your policy is the specified term length. This is the time period during which your coverage is effective. This period typically ranges from five to 30 years, increasing in five-year increments.
• Renewability: Many term policies are renewable to extend your term to as long as 35 or 40 years. If you opt for a yearly renewable policy, it’s renewable each year according to guidelines set forth in your contract. If your policy features guaranteed renewability, it means you can renew your policy without additional underwriting steps.
• Evidence of insurability: When purchasing term policies, the amount of coverage available to you may rely on your age and estimated retirement date. Many insurance companies want evidence that you qualify financially for the coverage terms you've requested. 

What Happens if You Outlive Your Term Life Insurance?

Because term life insurance provides coverage for a predetermined period of time, many people outlive their policy. Several things may happen at this point:

• The policy expires unused: Because most term policies don’t include a savings component or other value beyond the death benefit, if you outlive your policy, it simply expires and the benefits are lost. If you’ve purchased a return-of-premium rider, you’ll typically receive a refund of all or some of your paid premiums, but these add-ons come at a cost that is often prohibitive.
• You can renew your policy: If your policy offers a coverage renewal option, you may opt to increase the term before it expires. Coverage extensions are typically purchased in five-year increments. Depending on your plan, this extension can often be done without additional underwriting steps.
• You can buy a new policy: If you’ve outlived your term life insurance but still want coverage, you always have the option of purchasing a new policy. Although this option lets you shop around for coverage that suits your current needs, it can be a costly choice because of age and age-related factors.

Can I Convert Term Life Insurance to a Permanent Policy?

It depends on your policy. Many term life insurance plans offer policyholders the option to convert coverage to a permanent policy. Because the process typically doesn’t require additional underwriting steps and you maintain your initial underwriting class if you convert, this option may be simpler than purchasing a brand-new policy. However, it's usually governed by terms set forth in your original insurance agreement, so be sure to read through your contract for conversion specifics, such as the ones listed below:

• Conversion periods: If your policy permits conversion, you may need to do so during a specified conversion period. For example, if you have a 20-year policy, you may only be permitted to convert during the first ten years.
• Conversion percentages: Depending on your policy, you may be able to convert the full value of your policy or opt to convert only a portion of it. Converting only a portion of your term life insurance to a permanent policy may result in reduced premiums.
• Premium credits:  Some insurers offer policyholders a credit for premiums paid toward their term policy if they convert to a permanent plan within a specified time period. These credits may be used to offset the premiums of the new permanent policy.
• Policy type: Some insurers may specify the type of policy available during the conversion. For example, you may only be able to convert your plan into a universal or whole life policy.

When Should You Consult a Professional?

If your term life policy is nearing its expiration, it may be helpful to get professional advice about pursing additional coverage options. An insurance agent, a representative from your insurance company or another reputable financial professional can help you navigate available options to secure the coverage you need to keep your loved ones protected.