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Term life insurance provides valuable coverage for a specific length of time, usually between 10 and 30 years. But the coverage typically ends—with no payout—if you outlive the policy term. You may be able to renew or extend your term, convert to whole life or shop for a new policy with a different company. Here's how to plan your next steps for uninterrupted coverage.
How Term Life Insurance Works
When you buy a term life insurance policy, you choose the death benefit and term that best fits your financial goals. Terms usually last between 10 and 30 years, and premiums are due either monthly, quarterly or annually. The premiums and death benefit usually won't change throughout the term. If you die within the policy's term, your beneficiary receives the death benefit. But if the term ends before you die, there's no payout to your heirs and the policy expires.
Can You Modify Your Existing Term Life Insurance Policy?
It's possible to change your life insurance term before it expires, and pursuing this option early on can help you get better premium rates. You have a few options.
Renew Your Term Policy
Your insurance company may allow you to renew or extend your term life policy if it contains a guaranteed renewable clause. You'll typically keep the death benefit without going through a new underwriting process or getting a new medical exam. Some choose this option if it's the only way to continue having life insurance due to a change in health.
However, the company will likely raise your premiums to account for your age. And renewals are typically for a one-year term, so premiums may continue rising each year. If you need coverage for more than a year or two, it could make sense to convert the policy to whole life or shop for a new term policy with another insurer.
Convert to Whole Life Insurance
If your term life insurance policy includes a term conversion rider, then you may be able to convert to a whole life policy. This could be a good option if your health changes or you need to continue providing for dependents.
Whole life insurance typically remains in force your entire life, assuming you make premium payments as scheduled. These policies build a cash value component over time. You can borrow from that cash value or exchange some of the value for a higher death benefit.
Buy a New Policy
You can also shop around for a new term life policy, either with the same insurance company or with another insurer. You'll go through the application process again and will need a new medical exam.
This option could make sense if you can't convert your term policy to a whole life policy or can't afford a whole life policy, and you need coverage for more than a few years. It can be a good opportunity to find a cheaper premium or make adjustments to address your needs at this stage in life. If you have more savings and less debt, for example, you may need less coverage. And if your children are a bit older, then you may opt for a shorter term.
If your term policy is still in force and you know you'll want to extend coverage, you could consider buying a second life insurance policy now. This ensures you avoid paying a higher premium.
Pros and Cons of Extending Your Term Life Insurance
Renewing or extending your term life policy with the same company can help ensure you keep coverage. But it comes with some downsides too. Here are some pros and cons to consider:
Pros
- You'll have coverage for a longer period.
- You already have a relationship with the insurance company.
- It may be the only option for continuing coverage if there's been a change in your health.
Cons
- Your policy will likely cost you more.
- You may have to convert to a whole life policy.
- Renewals may only be available in one-year terms.
The Bottom Line
When you take out a term life insurance policy, you typically choose a fixed term of up to 30 years, but there are ways to adjust the term if you want more or less coverage. Depending on the language in your life insurance contract, you may be able to renew the policy, convert it to whole life or get a new policy, either with the same company or a different insurer. These options can allow you to make adjustments that fit your current lifestyle.
Many states allow life insurance companies to use your credit-based insurance score when calculating your premiums. If your state allows this practice, consider improving your credit if necessary before purchasing life insurance. You can get a copy of your credit report and check your credit score for free with Experian, then address any issues you find on your report.