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Most people ask themselves, “What happens if I outlive my term life insurance policy?” Here are a few things you should know about this type of insurance.
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Introduction
If you purchased a term life insurance policy and stopped paying the premiums, understand what would happen to your coverage. If you outlive the term of your policy, your life insurance coverage will end. This is because term life insurance only covers you for a specific period of time – typically 10, 20 or 30 years.
What is Term Life Insurance?
Term life insurance is one of the most affordable and straightforward types of life insurance. It provides coverage for a set period of time, typically 10, 20, or 30 years, and pays out a death benefit to your beneficiaries if you die during that term. If you live to the end of the term, the death benefit is never paid out and you keep any premiums you have paid.
What Happens if the Insured Person Outlives the Term of the Policy?
If you die during the term of your policy, your beneficiaries will receive the death benefit. If you live to the end of the term, the policy will expire and you (or your estate) will not receive any death benefit.
The Policyholder’s Options
As the name suggests, term life insurance is temporary, typically lasting 10, 20, or 30 years. So what happens if you outlive your policy?
Assuming you’re still alive and healthy when your term life policy expires, you have a few options. You can let the policy lapse and simply stop paying premiums. If you have a whole life policy, you may be able to convert it to a permanent policy (although this isn’t always an option). You could also purchase a new term life policy.
Of course, if you do outlive your term life insurance policy, it means that your family won’t receive any death benefits from the policy. However, this may not be as big of a deal as you think. First of all, by the time your policy expires, your children may be grown and independent, so they may not need the death benefit as much as they would have when they were younger. Additionally, if you have other sources of income (such as a pension or retirement savings), your family may not need the death benefit to survive financially.
The Death Benefit
If you die during the term of your policy, the beneficiaries you named in your policy will receive the death benefit. The death benefit is the amount of money that you have chosen to be paid to your beneficiaries upon your death. If you have a $500,000 policy, for example, your beneficiaries will receive $500,000 if you die while the policy is in force.
The Cash Value
Once the term of your life insurance policy expires, you will no longer have coverage. However, if you have a whole life or universal life policy, you will still have a “cash value” account with the insurance company. This account grows over time and can be used to pay premiums or borrowed against in the future.
The Surrender Value
There are a few things that you should know about the surrender value before making a decision about your policy. The first is that the surrender value is not the same as the cash value. The cash value is the amount of money that you would receive if you were to cancel your policy today. The surrender value is the amount of money that you would receive if you were to keep your policy until it expires.
The second thing to know about the surrender value is that it is usually less than the cash value. This is because the insurance company has to pay back all of the money that they have invested in your policy, plus they have to make a profit. For this reason, it is usually not in your best interest to surrender your policy.
If you do decide to surrender your policy, you will likely receive a check for the surrender value within 30 days. You can choose to do whatever you want with this money, but keep in mind that you will no longer have life insurance coverage.
The Conversion Option
Most people choose term life insurance for its affordability and because it meets their needs at a certain point in their lives. But what happens if you outlive your term life insurance policy? The good news is that most policies come with a conversion option, which allows you to convert your policy to a permanent life insurance policy without having to retake a medical exam.
The conversion option is typically available for a limited time, usually 5-10 years, and allows you to convert your policy to a whole life insurance policy without having to prove that you are still insurable. This can be a valuable option if your health has changed since you originally purchased your policy or if you want to keep your life insurance coverage in place for the rest of your life.
The Reinstatement Option
If you outlive your term life insurance policy, you have the option to reinstate your coverage. This means that you can restart your policy after a break in coverage, and you will not have to undergo a new medical exam. However, you will likely have to pay a higher premium, as your age and health status will have changed since you first took out the policy.
Conclusion
Assuming you don’t die during the term of your life insurance policy, what happens when the policy expires? Do you get anything back?
In most cases, no. Term life insurance is designed to be a temporary death benefit, so the insurer generally doesn’t pay out if you outlive your policy. Some policies may have a return of premium rider that refunds a portion of your premiums if you don’t die during the term, but this is typically a relatively small amount.
