Our Term Life Insurance Is Expiring. Now What?
Your term life insurance is about to expire, you’re retiring, and the kids are gone. This is a good time to determine your insurance needs and weigh your options.
Here’s how to choose the best course of action for your ending-soon term life policy.
Start with these 3 questions:
Do loved ones need your financial support?
People often buy a term life policy when they get married, buy a house or have their first child. This type of cost-effective policy provides financial security for your family in the event of your passing.
Now that your children are grown and independent, you may not need as much insurance. However, if your spouse or children still rely on your part-time income or you’re supporting a family member with special needs, the loss of income in the event of your death could be significant.
Your family may also experience a decrease in your pension income and social security benefits, making your life insurance decision more significant.
Do you have debt?
As you near retirement, you may still be carrying debt. Maybe you bought a house later in life and have a substantial chunk to pay. Or maybe you went back to school for an advanced degree and are paying off your student loans—as well as your children’s.
If you have significant debt and you pass away, your savings and benefits may not be enough to cover the payments. In this case, continuing your life insurance policy for your family’s financial security will be an important consideration.
Do your retirement funds provide access to cash?
If you and your spouse have a well-funded retirement plan, you will most likely use these funds to cover final expenses. The accessible cash will cover any medical and burial costs.
However, if your money is tied up in assets, such as investments or real estate, covering final expenses may prove challenging. In this situation, your life insurance plan will provide your family with the funds they need to comfortably cover any end-of-life expenses.
Next, explore your term life policy options:
This is where things get a little complicated, as there are many policy options with nuanced details. Your retirement specialist can guide you through the process and help you choose the plan that best fits your needs. In the meantime, you may want to consider the following:
Buy a new term life policy
If the higher cost of a permanent life insurance policy doesn’t appeal to you (a reason you may have chosen your original term policy), buying a new term policy might be a good choice.
You will have to pass a medical exam. And, because you are older, your premium may be higher. However, if you’re in good health, the overall costs may be lower (versus paying for permanent insurance), as the amount of time you need the policy may be shorter.
Convert your coverage
There’s a good chance that your term life insurance policy includes a conversion (or exchange) option. If so, you can convert your expiring term life policy to permanent life insurance coverage.
Conversion requirements will vary, depending on the insurance company. The requirements may allow you to convert your policy at any time before expiration, during a specified period (e.g., within the first ten years) or at a particular age—typically between 65 and 70.
If converting your term policy is the option you prefer, you’ll want to start the process well before the policy expires.
Renew your term life policy
People often choose this option if their term policy is expiring and their health has deteriorated.
If your policy allows renewals, and you decide on this option, you won’t need to do a medical exam. But, because you are older and have health problems, your premium rates will be higher.
Get started today!
You originally took out your term life insurance plan to provide for your loved ones if necessary. The policy provided peace of mind as you raised your family. Now, it’s expiring.
This is the perfect time to check in with your retirement specialist. Together, you can look at your finances and explore all your coverage options. The sooner you do, the sooner you can get back to the important things—like enjoying your retirement!
MySeniorHealthPlan.com’s retirement specialist Aaron can answer your term life policy questions and help you choose the right insurance for your retirement needs.