What Happens if You Outlive Your Term Life Insurance Policy?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on September 07, 2023

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Overview of Term Life Insurance

Term life insurance is a form of life insurance that provides coverage at a fixed rate of payments for a limited period, the relevant term.

Once the term expires, it's up to the policyholder to decide whether to renew the policy or let it lapse. While term life insurance policies come with no investment or cash value component, they are favored for their simplicity, lower premiums, and substantial death benefits.

What Happens if You Outlive Your Term Life Insurance Policy?

Outliving a term life insurance policy means that you are still alive at the end of the policy's term. When this occurs, the coverage ends, and you are no longer required to pay premiums.

However, this also means that your beneficiaries will receive no death benefit from this policy. Many term life insurance policies offer the option to renew or convert the policy into a permanent one, but these come with their own set of considerations.

Options After Outliving a Term Life Insurance Policy

Letting the Policy Expire

If you have no dependents or financial obligations that require a life insurance payout, you might consider letting your term life policy lapse.

It means that you stop paying the premiums, and your coverage ends. However, letting the policy lapse without having an alternative insurance or financial plan could leave your dependents vulnerable to financial risk if an unexpected event occurs.

Renewing the Policy

Many insurers offer the option to renew your term life insurance policy after it expires, albeit often at a higher premium. The increase in premium is primarily because insurance rates are directly related to age and potential health risks.

As you age, the likelihood of health issues increases, and so does the risk to the insurer. Hence, while renewal is an option, it's critical to factor in the higher costs.

Converting to a Permanent Life Insurance

Another option is to convert your term life insurance policy into a permanent one, such as whole life or universal life insurance.

These types of policies offer coverage for your entire lifespan and often come with a cash value component.

However, they are generally more expensive than term life policies. If you're considering this option, it's essential to weigh the costs and benefits, as well as your long-term financial objectives.

Buying a New Term Life Insurance Policy

If your health is in good shape, you might consider buying a new term life insurance policy. While your premiums will likely be higher due to your increased age, this could be a cost-effective way to continue your life insurance coverage.

It's always best to consult with a financial advisor or an insurance expert to explore this option and understand the implications.

Options After Outliving a Term Life Insurance Policy

Factors to Consider When Outliving a Term Life Insurance Policy

Health and Age

Your health and age significantly influence the cost of life insurance. Older age and health conditions usually lead to higher premiums. Therefore, it's vital to consider your current health and age when deciding what to do after outliving your term life insurance policy.

Current Financial Status

Your current financial status, including your income, savings, and financial responsibilities, should play a crucial role in your decision. If you're financially stable with a sufficient emergency fund and retirement savings, you might need less life insurance coverage.

Future Financial Obligations

Think about any financial obligations that could arise in the future. For example, if you plan to support a child's college education or have a significant mortgage on your home, you may need continued life insurance coverage to protect against these potential financial burdens.

Dependents and Their Future Needs

Consider the needs of your dependents. If your children are grown and financially independent, your spouse is comfortably retired, or you have adequate savings, you might require less or no life insurance.

On the other hand, if your loved ones depend on your income for their daily expenses, continuing life insurance might be essential.

Factors to Consider When Outliving a Term Life Insurance Policy

Practical Advice for Those Who Outlive Their Term Life Insurance

Professional Consultation

Navigating the life insurance landscape can be challenging. Working with a financial advisor or a qualified insurance professional can help you understand your options and make an informed decision.

Periodic Review of Life Insurance Needs

As life changes, so do your insurance needs. Regular reviews of your life insurance policy and overall financial plan can help ensure that you have the right amount of coverage.

Preparation for the End of Term Life Insurance

Plan ahead for the end of your term life insurance. Knowing your options and having a plan can make the transition smoother and more financially sound.

Bottom Line

Navigating the crossroads of outliving a term life insurance policy requires strategic planning and decision-making. This policy, which provides coverage for a fixed period, leaves you with a variety of options upon expiry.

You may let it lapse, renew it, convert it to a permanent policy, or procure a new term life insurance. Your age, health status, current and future financial obligations, and the needs of your dependents greatly influence this choice.

Consulting a professional, conducting regular insurance reviews, and preparing for your policy's end are crucial steps to align your decisions with your financial objectives.

Ultimately, the goal is to secure an approach that best ensures financial stability and protection for you and your dependents, adjusted to your unique circumstances and needs.

What Happens if You Outlive Your Term Life Insurance Policy? FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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