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What Happens After My 10, 20, or 30 Year Term Expires?

Term Policy Taking on Water

Is Your Term Life Insurance Policy Taking on Water?

Let’s say you have a 10 year level term life insurance policy.

What happens after the 10 years is up?

Do you lose your life insurance coverage?

Most people assume that if they have a “10 year term policy” or “20 year term policy” that their coverage ends at the end of the term.  In most cases, this is not true.

Myth – Term Life Insurance “Expires” when Initial Term Ends

Most term life insurance policies actually cover you to age 95

At the end of your initial term, most term policies do not expire.  However, the premiums will increase on an annual basis, in most cases, to an astronomical amount.

There are a few carriers, such as Lincoln, whose renewal premiums are not too outrageous.  You’ll need to wait for your first renewal premium notice to know for sure what your new premium will be.

Compare Term Life Insurance Rates

Why Do Premiums Increase after the Initial Level Premium Period?

When you buy a life insurance policy, let’s say at age 40, you could buy an annual renewable policy, which goes up every year since you’re older and for insurance purposes, are just a little riskier to insure.  So annual renewable life insurance policies are available, but they’re not very popular since the premiums go up every year.

Your premiums for a $1,000,000 male non-smoker might be $250 for the first year.  Then $265 in year 2, $275 in year 3, and so on, until 10 years later when you’ll pay about $450 for the coverage.  This is an example of annual renewable life insurance.

Since most people would rather plan their budget around fixed expenses, many insurance carriers offer level term life insurance policies.  In essence, they’ll still cover you until age 95, but for a fixed term, say 10 years, or 15, 20, or 30 years, your premium (payment) is fixed.

Calculating Level Term Premium – It’s a Simple Average

In the example above for 10 year term life insurance, they would add up the premium for each of the first 10 years and divide it by 10, and that would be your premium for the first 10 years.  So essentially, 10 year level term life insurance just charges you an average premium for your first 10 years you’ll be covered.  Then in years 11 and up, or in the case above, from ages 50 to 95, it reverts to annual renewable insurance coverage.

If you can understand that, then you’ll see the importance of locking in as long of a level term as you think you might possibly need coverage, because once the level term is up, your premiums will skyrocket, and eventually become unaffordable.

What to do if my Term Policy is about to “Expire”

If you have a policy whose initial term period is almost up, you have several options with most policies.

  1. Replace the Policy for a cheaper one – If you’re still healthy enough to get a new policy, you might consider applying for a new term or permanent policy.  It will most likely cost a fraction of the renewal premium of your current term policy.
  2. Convert the Policy – Check the policy’s conversion features.  You may be able to convert the policy to a permanent policy without evidence of good health.  If your health has diminished since the term policy was issued, this may be a good option for you.  See notes on term policy conversion here.
  3. Pay the Renewal Premium – If you can’t afford to convert your policy or replace it, you might consider paying the renewal premium.  You’ll have to take your health and estimated life expectancy into account here, as well as how long you still need the coverage.  If you need it for several more years and you’re still healthy, it’s probably best to bite the bullet and buy a new policy.
  4. Decrease your Death Benefit – Many companies will allow a one-time decrease in face value to your policy, which will reduce your premiums.
  5. Let your Policy Lapse – If none of the above are valid options for you, and you can either no longer afford your policy or no longer need your policy, simply stop paying premiums and the policy will lapse.

Other Resources you want to read:

I’ve written a couple other articles on this site you will want to read before deciding on whether to replace your policy or convert it.

Replacing a Life Insurance Policy

Understanding Life Insurance Conversion

How Guaranteed Level Term Life Insurance Works

*Written by Chris Huntley. Huntley Wealth Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.
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Chris Huntley
Chris Huntley is the owner of Huntley Wealth Insurance, a San Diego life insurance agency. You can find him on Google + and Facebook. Over the past 8 years, Chris has consulted with over 2000 individuals about their insurance needs. He is a proud husband and father to three adorable girls.
Chris Huntley
Chris Huntley

What will happen to my term life insurance policy when my term is up? Does it cancel?


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{ 16 comments… add one }

  • charlie January 22, 2013, 1:44 am

    a friend of mine mom died and she had old life insurance polices and they were rockford , he went to cash them in and they are no longer around so what happens when you cant pay for the funreal because the policies were old and they are no longer around to cash them

    • Chris Huntley January 23, 2013, 3:15 pm

      Chances are they were acquired by someone else. Perhaps you can track them down through a google search.

  • Gene February 19, 2013, 2:14 pm

    Dear Mr. Huntley,

    What happens when a Term Life Insurance Policy lapses? Obviously there is no coverage anymore, but is any of the money paid in over 20 years recovered?

    Thank you,

    Gene

    • Chris Huntley February 23, 2013, 1:02 pm

      No money is paid back. You no longer owe premiums and the insurance company no longer owes a death benefit upon your death.

  • FLOYD MARTIN April 14, 2013, 3:26 pm

    So you pay and pay into term then after 15 to 20 years they can jack your rates up to the moon?
    Where as if a old person pays into Whole Life it is forever and will never expire!
    It would appear to me anyone over 60 would be a fool to buy term!
    Old age term sounds good for the Insurance company!

    • Chris Huntley April 21, 2013, 11:14 pm

      I respectfully disagree, Floyd. There’s a host of reasons why someone in their sixties would only need coverage for a short period of time, such as a ten year period. For example, it could be to secure an sba loan, or for a business buy-sell agreement, or maybe you plan to work for 10 more years and only need the coverage while you’re working. Why would any of these people buy whole life insurance when they could pay 1/10 the premium for term?

  • Edna Tabor January 13, 2014, 1:30 am

    I had a 5 year term policy. They continued to take the money out of my pay role for 10 years. Then when the insurance agent contacted me last week he said that my policy expires in Feb.and I needed to sign up again. How did they renew my policy after the first 5 years without contacting me?

    • Chris Huntley January 30, 2014, 10:41 am

      Perhaps it automatically moves to annual renewable term after the initial level term. Many policies work this way.

  • Bob April 8, 2014, 2:15 pm

    Hi Chris,

    At 50 my father opened a life policy for 25K, it expires next year at age 80.
    He turns 80 next year, the policy is active and will be paid in full next year.

    He doesn’t want to open a new one, so what becomes of that policy?
    If he passes in the next 5-10 years will that policy still pay him 25K, even if it’s paid up , but he did not renew it? Actually mo mother is the benficiary, will she be entitled to the 25K?

    Thank you,
    Sammy

    • Chris Huntley April 16, 2014, 8:38 am

      If it’s a term policy, then it’s not “paid up”. Instead what will likely happen is his premiums will increase next year if he wants to continue the coverage.

  • Tracey Howes April 16, 2014, 3:54 pm

    Hi, my mother in law forgot her life insurance policy was due to expire and so on 15th March this year it expired. Just a week later she felt ill and last week (less than a month after the policy expired) she passed away from advanced womb cancer that had gone undetected.
    It seems incredibly unfair and ironic that for the last 30 odd years she had paid £20 a month for insurance and 3 weeks after it expired she passed away. In this circumstance is there ever a chance an insurance company would pay out?

    • Chris Huntley April 18, 2014, 12:12 pm

      Hello Tracey,
      This is a terrible tragedy. I’m so sorry.

      I think if you could prove that perhaps she missed the payment due to mental incapacity, you may have a case, but to be honest, I have no idea. The carrier typically sends out multiple notices, and provides a 30 day grace period usually after you miss payment in which you can make your premiums current with no affect on coverage.

      You might talk to an attorney about it, but honestly, I just don’t know. Again, so sorry for your loss.

  • sophia April 21, 2014, 12:42 pm

    What would the best insurance policy for someone 50 years old to purchase

    • Chris Huntley May 5, 2014, 9:27 am

      Hello Sophia,
      Depends on what you are trying to accomplish. I just emailed you.

  • Darlene July 19, 2014, 10:31 pm

    What would the best insurance policy for someone 50 years old to purchase

    REPLY

    • Chris Huntley July 21, 2014, 1:18 am

      Hello Darlene,
      Depends on your health. We will be in touch with you to discuss the best option for your insurance needs.

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