Have you ever wondered as to what happens when a term life insurance policy matures? Read on to find out.
Where a whole life insurance policy provides coverage since the time you are born to when you die, a term insurance works in a different way. Term insurance policies only support you for a specific time. So, the question arises, what happens when your term life insurance policy comes to an end? What should you do next and what policies should you look for?
If your term life insurance policy is about to come to an end, you must be thinking about the next steps to take. What if you are in a different situation right now and have to reevaluate your needs completely? What are the do’s and don’ts to an ending term life insurance policy.
Find out all the answers to your questions in this article! Let’s dive in.
When Does A Term Life Insurance Policy Mature?
Reaching the end of your term life insurance means that you have outlasted your insurance policy which is a good thing. The best sort of term life insurance is when you do not ever have to use it, however, it is still there if ever your family might have to use it.
It is important to know that a term life insurance policy does not necessarily “mature” when the term period ends. The low cost that you pay is what expires. When you buy an insurance policy, the term typically lasts for 10 to 40 years.You can then decide as to what you want to do with your policy. You can even continue it till you reach 95, however, that would cost you a lot more.
What Should You Do When Your Term Life Insurance Policy Matures?
What happens when your term life insurance policy matures? Well, that can be determined on the basis of your life insurance needs. Your policy may still hold some value to you irrespective of whether it has ended or not. Moreover, there are also other options that you can go through once your term life insurance policy has ended or is about to end.
Keep The Term Insurance Policy
There might be some instances where you may want to continue with the insurance.
However, it is the worst option you could select as it would cost you a lot of money. Moreover, you would still have to alter a few things in the policy to suit your current needs.
This option should only be chosen if you are very old or suffer from a chronic illness that you won’t live long enough to apply for new insurance. This can also be a good option if your insurance company offers a conversion option that you would like to use.
This would be the least expensive option if you are 70 and you have to provide proof of your good health. If that is not the case, you could lose your savings or you may not get any insurance at all.
Replace The Term Insurance Policy
This is the most popular option that people usually opt for. A reason for this could be the fact that it is not very difficult to change your current policy with a completely new one.
As an active and healthy individual, you may not encounter a very substantial change in cost, particularly since insurance rates have only decreased in the previous decade. On the off chance that you’ve matured a considerable amount since you bought the coverage, you will have higher rates yet a less likely need to use the policy, so it might be generally similar.
Once the company accepts your application, you will be sent a letter of replacement to the other carrier, and your new insurance policy will begin the moment you clear your first dues..
Cancel The Term Insurance Policy
Cancelling your term insurance policy is by far the simplest of all options. It is also the least expensive choice.
If you have no use of life insurance anymore, all you have to do is simply call the insurance company that provides your coverage, and ask them to cancel your term insurance policy.
However, before you make such a decision, you should look at all the factors and also recheck your numbers to make sure that you don’t need anything else because the moment your policy is called off, you cannot change anything.
Convert The Term Insurance Policy
Another great option is to convert your term life insurance policy to a permanent life insurance policy. Almost all the term life insurance policies provided nowadays come with a conversion option. However, if you received an insurance policy years ago, then you should recheck with your company as to whether they offer a conversion policy or not.
A few common conversion rules that most companies follow are:
- Period: This lets you convert your insurance policy for a specific time period.
- Specific Age: This lets you convert your insurance policy till you reach a certain age.
- Entire Term: This lets you convert your insurance policy at any given time during the entire term. However, you must do it before the expiration date.
Extend The Term Insurance Policy
This choice could be great if you feel like you might need insurance for a short amount of time. If you are unable to get a new policy due to health reasons or any other issue, then extending your term insurance policy could be a great option for you.
However, you should keep in mind that the cost will be more and it will continue to increase on a yearly basis. Therefore, you should do your research and weigh out all your options to make the right decision.
Remember that a life insurance is for your family and loved ones – to make sure that they have some financial security and stability in case something happens to you. Now that you have gone through all of your options, you know what happens when a term life insurance policy matures. Thus, you can make the right decisions for you and your family.