What Happens When A Term Life Policy Expires?
A term life insurance policy will expire (mature) at the end of the term, which will either be a number of years (such as 10, 20, or 30) or when you reach a specific age (such as 80 or 85). Once you outlive the term, you stop paying premiums, the coverage ends, and you’re no longer insured.
What You Can Do Before A Term Life Policy Matures
You have options beyond letting a term life policy expire. It varies by company, but in most cases, you can do the following before it ends:
- Convert: Nearly all term life insurance policies sold today automatically include a convertibility rider. These riders give the right to convert from term life to permanent coverage without having to undergo any qualification.
- Renew: Some term life policies are renewable, allowing you to continue coverage without reapplying or requalifying. If you agree to the renewal, the insurer will continue the insurance for an additional period (usually shorter than the original term) at a new, higher price.
- Buy a new policy: You’re certainly free to buy a new term life insurance policy (or other type) from the same insurer or another.
- Sell the policy: Under certain circumstances, you may be able to sell your policy to an investor. It’s called a “life settlement,” and it’s generally available only to seniors age 65 or older with a policy with $100,000 or more in coverage.
Do You Get Your Money Back When A Term Policy Matures?
In nearly all cases, you do not get your money back when a term life insurance policy expires.
The only exception is if you have a return of premium rider. With “return of premium term life insurance“, the insurer will indeed refund 100% of your premiums at the end of the term. ROP term insurance is very rare, and it costs much more than a standard term life policy.
How Does Term Life Insurance Work?
Term life insurance is temporary life insurance that lasts for a specific period of time. If you die while the policy is in force, the insurer will pay out the full death benefit (how much coverage you have) to your beneficiaries.
Term insurance is the most affordable type of life insurance because A) there is only a death benefit and no cash value, and B) the policy expires at some point rather than lasting forever.
Permanent life insurance policies (whole life and universal life) will cost approximately 5-20 times more than term life.
Frequently Asked Questions
Since term life insurance does not accumulate cash value, you cannot cash it out. You can cancel a term policy, but there will not be a cash surrender valueCash Surrender Value
The amount of money refunded to the policyowner upon cancelling (aka "surrendering") the policy. The surrender value is generally equal to the current cash value or very close to it..
Insurers keep term life insurance premiums because it’s a primary reason why term life costs so little. Another way to view this is that you enjoy super low premiums for all those years. However, the trade-off is that if you outlive the term policy, the insurer keeps the money. On the flip side, if you were to get the money back, you would have been paying a significantly higher premium (likely 200-300% more). It’s one or the other. You can’t have it both ways.
Some people do indeed view term life insurance as a waste since the policy eventually expires, and the insurer keeps the money. Everyone is obviously entitled to their opinion on any matter, but this is a rather unfair characterization of how term insurance works. Consider that insurance (of any kind) is meant to provide peace of mind. If a qualifying event occurs while the insurance is active, the insurer pays out. Term insurance does just that. If you were to die while the policy is in force, the money will pay out, which allows your family to continue with their lifestyle. That’s the peace of mind that term insurance provides. Consider car insurance as an example. If you never file a claim, do you look back at your auto insurance as a waste? Certainly not, because if you had been in an accident, your insurance policy would have kicked in, covered the cost of a replacement vehicle, and prevented you from having to pay tens of thousands of dollars for one. You paid for peace of mind. Lastly, term life insurance is so inexpensive because it expires at some point. If you want permanent life insurance instead, you certainly can, but it will cost 5-20 times as much as term life.
- Nationally licensed life insurance agent with over 16 years of experience.
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Anthony Martin is a nationally licensed insurance expert with over 16 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
- Nationally licensed life insurance agent with over 20 years of experience
- Best selling Amazon author.
Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.
- Nationally licensed life insurance agent with over 15 years of experience
- Best selling Amazon author of five insurance sales books.
David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.
