What to Do When Your Term Life Insurance Expires

If your term life insurance policy expires and you still want coverage, you have options.
Aubrey Cohen
By Aubrey Cohen 
Edited by Lisa Green Reviewed by Tony Steuer
What to Do When Your Term Life Insurance Expires

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Term life insurance policies ideally last as long as your main financial obligations, such as a mortgage or the costs of raising children. But sometimes things don’t work out that way.

If your term life policy is ending, you may still need life insurance if you:

If you fit one or more of these categories, there are a few options to consider.

Buy another term life insurance policy

If you still have obligations like mortgage payments or dependents, the best option for most reasonably healthy people is to buy another term life insurance policy. You might have to pay a higher price now that you’re older, but buying a shorter term — such as five or 10 years rather than 20 — will help lower the cost.

Shopping around can also pay off. Even if your former insurer offered the best deal when you were searching for your previous policy, another company could have better life insurance rates this time.

Keep in mind that you'll probably have to answer health questions and take a medical exam during the life insurance application process.

Take it year by year

Rather than buying a new term life policy for five or more years, you could opt for annual renewable term life insurance, where you decide each year whether to continue coverage. This may be a good choice if you anticipate only a few more years of major financial obligations. The main drawback is that rates can jump quite a bit each year, making a level term policy a better choice for needs that last at least five years.

As an alternative to annual renewable term life, ask your agent if you can extend your current term policy one year at a time. This would let you avoid a new life insurance medical exam, but the price jump may be prohibitive. This could also be an option for people with terminal medical conditions who need life insurance at any cost.

Convert your term policy to permanent life insurance

Although term life insurance is best for most people, permanent life insurance has certain advantages. Permanent life insurance, as the name implies, can last for the rest of your life. But it also costs much more than term life. Types of permanent policies include whole, universal, equity-indexed universal life and variable life insurance.

If you still need coverage after your term life policy expires, your carrier may offer the option to convert it to a permanent policy — without taking a new medical exam or answering health questions again. You may be able to convert only a portion of the life insurance death benefit, however, meaning you’d have a lower benefit once the term policy ended.

Most companies allow you to convert term life to whole life insurance, which has a fixed premium, investment return and death benefit. Some may allow conversion to universal life, which offers flexible premium payments and allows changes to the benefit amount. Look for the conversion provision in your policy document for the details or ask your agent.

If your term life policy allows conversion, there will be a deadline for conversion that’s before the end of the policy. There’s also typically an age cutoff for converting, usually 75. The new permanent life premiums get higher every year you wait to convert. Converting only a portion of the coverage amount to a permanent policy can save some money.

Buy a new permanent life insurance policy

If you decide you want permanent life insurance, converting your term life policy may seem like the most convenient way to do it. But if you’re still in good health, it might not be the cheapest route.

You will usually have only one option for conversion, and it’s often one of the company’s more expensive policies. So it's smart to compare quotes for other policies, too.

Most people who still need life insurance coverage are best off buying a new term life insurance policy. If you’re one of the exceptions, you may want to consult a life insurance agent or broker.

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