Term Life Insurance is one of the most popular forms of life insurance, thanks to its affordability and the ability to tailor policies extensively to suit the policyholder's needs. Before purchasing Term Life Insurance, many shoppers want to know how term lengths work and what happens before and after Term Life Insurance policies expire.
Does Term Life Insurance Have an End Date?
The short answer is yes; Term Life Insurance has an expiry date. As long as the policyholder continues to pay their premiums, Term Life Insurance provides coverage through a set "Term length," a predetermined period that typically ranges from 10 to 30 years. After the end date, the policy expires.
What Determines the End Date of a Term Life Insurance Policy?
As the policyholder, you choose the end date. While shopping for Term Life Insurance, the policyholder selects the term length (generally between 10-30 years) based on assessing how long they wish their policy to last.
What are the Benefits of Customizable Term Lengths?
Customizable term lengths allow the policyholder to buy as much or as little coverage as they need. This decision would depend on the policyholder and their dependents as well as what financial responsibilities would be left behind if the policyholder passed away. Premium rates also vary based partly on term length, and so customizable term lengths are one of the features that can make Term Life Insurance an affordable option.
Does Term Life Insurance Expire at a Certain Age?
Term Life Insurance policies expire on the end date named on the policy documents. The end date coincides with the term length purchased, and each case is unique to the consumer. However, most life insurance companies do not offer Term Life Insurance policies for customers over 80 years old (alternative forms of life insurance are available to these consumers). In practice, this means that insurers will typically not issue Term Life Insurance policies with terms that expire after the policyholder turns 81. For example, a 70 year old consumer can still purchase a Term Life Insurance policy, but with a maximum term length of 10 years.
In comparison with Term Life, Permanent Life Insurance (like Universal Life Insurance or Whole Life Insurance) provides lifetime coverage, as well as a cash value that Term Life Insurance policies do not have. However, these policy types tend to be more expensive.
How Does Term Life Insurance Provide Coverage During the Period of the Term?
Term life Insurance policies offer fixed death benefits. If the policyholder passes away before the end of the Term, the insurer typically pays the full amount of the death benefit to the policyholder's beneficiary, subject to the terms of the policy.
What Happens When Your Term Life Insurance Policy Expires?
If you outlive your Term Life Insurance policy, no benefit is paid out. Term Life Insurance policies are affordable precisely because of their simplicity, and in this case, simplicity means that benefits are only paid out if the policyholder dies during the Term.
While you're in the process of buying your first Term Life Insurance policy, consider what you plan to do after the policy expires. You'll have several options: renew their policy at the end of the term (this is referred to as Renewable Life Insurance), apply for a new Term Life Insurance policy, convert to Permanent Life Insurance, or cancel the existing policy altogether. Try to project into the future and put yourself in your shoes on the day your policy expires. Will you still need life insurance? If so, how much and for how long? Thinking about this as you buy your first Term Life Insurance policy will allow you to plan for a smooth and affordable transition from one life insurance policy to the next, or none at all.
Converting Term Life to Permanent Life Insurance
If you think you may eventually want to have a Permanent Life Insurance policy, one option is to buy a Term Life Insurance policy with a clause that allows you to convert to Permanent Life Insurance later. One reason to consider this arrangement is that if you wait until your Term Life Insurance policy expires, you'll be older and will face higher premiums for a Permanent Life Insurance policy as a result. Buying a Term Life Policy with the option to convert gives you a choice to lock in the lower premiums you'll be able to access while you are younger.
The one important caveat is that conversion clauses usually have to be exercised within a given amount of time after purchasing the policy. If you buy this type of policy, be sure you know exactly how much time you have to convert to Permanent Life Insurance before that option expires. For more information, check out AIG Direct's guide to converting to Permanent Life Insurance.
Can You Cash Out a Term Life Insurance Policy Before It Expires?
Term Life Insurance policies don't have a cash value, so you can't cash out a Term Life Insurance policy before the end date. If you are interested in a policy that offers an option to withdraw cash, you should explore other types of life insurance, such as Permanent Life Insurance.
Shopping for Term Life Insurance
If you decide that Term Life Insurance is the right option for you, AIG Direct can give you a quote in just a few minutes, either online or by calling our agents at (800) 294-4544. AIG Direct's DIY online life insurance platform can provide you with a quote and allows you to apply and purchase completely online.
If you need to learn more about Term Life Insurance before moving forward, take a few minutes to explore AIG Direct's Term Life Insurance page. Alternatively, if you're just starting out shopping for life insurance, AIG Direct's overview of different types of life insurance is a great place to begin your search.
