Outliving your term life insurance is a good problem since you’re still alive, but what’s next? What happens to your insurance if you’re alive, and can you get more?
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What is Term Life Insurance?
Term life insurance is a contract with your life insurance company to pay your beneficiaries a lump sum when you die. In exchange for the policy, you pay monthly premiums. If you pay the premiums on time and you die while the insurance is in effect, your beneficiaries receive the face value of the policy.
But what happens if you don’t die within the insurance term?
You Outlive your Term Life Insurance, Now What?
It happens, and it’s a good thing. People outlive their insurance policies all the time. Financially it may not feel like a good thing because you paid hundreds of dollars a month for 10 – 30 years for the policy, but now it’s ending, and you’re still alive.
Do you Get your Money Back?
The first question people often have is, do you get your money back?
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The answer, unfortunately, is ‘no.’ The only way you’d get your money back is if you paid for a Return of Premium rider, which would increase your insurance premiums, but guarantee you a refund of the premiums paid.
If you didn’t pay for ROP, you wouldn’t get your money back.
Options when you Outlive your Term Life Insurance
So what are your options when you outlive your term life insurance? There are several, and the right choice depends on your life circumstances. Your options include the following:
- Renew your policy if your insurance company allows it
- Buy a new term life insurance policy
- Let your policy expire
Do you Still Need Life Insurance?
Before letting your policy expire, ask yourself if you still need life insurance. Most people buy term life insurance when they’re young and have a young family. If you’re nearing its expiration, chances are you’re older and more financially secure.
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Reassess your financial situation and determine if you die tomorrow, would your loved ones need the insurance policy to pay the bills or cover your final expenses?
If you no longer have children at home and your spouse is financially independent, a new life insurance policy may not be necessary. In this case, you can let it expire and not get a new policy.
If you still need life insurance, ask your insurance company if your policy allows renewals before yours expires. If so, compare the premiums to those on a new policy to ensure you are paying the right amount.
What are the Alternatives to Term Life Insurance?
If you’re a senior, you might not like the premiums charged on term life insurance. Some insurance companies may not even offer a term life policy if you are a senior. For example, 55 is usually the cutoff for 30-year policies, but some companies offer term policies for seniors up to age 70 with shorter terms.
Fortunately, there are some alternatives, including:
- Final expense life insurance
- Whole life insurance
Both are permanent life insurance policies that last your lifetime but have higher premiums. Final expense policies cover your final expenses, such as your funeral and medical expenses. Whole life insurance payouts can cover anything, including leaving a legacy for your loved ones.
Term life insurance is excellent for young families, but it’s harder for seniors to get it or even afford the higher premiums. So if you’re a senior and your life insurance expired, consider a final expense policy if you need money saved for your final expenses.