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Term life insurance expiring? What happens & how to plan your next move

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Maskot/Getty Images/Maskot

Term life insurance can help financially protect your family if you pass away within the term period, as long as your premiums are paid. It's one of the more affordable ways to get coverage, with term lengths usually lasting 10 to 30 years, unlike permanent insurance, which lasts your entire life. Your beneficiary receives a death benefit if you have an active contract and pass away before the end of the period. You may have purchased a term life contract years or even decades ago. And now, as you're approaching the end of the coverage period, you want to know what happens when term life insurance expires. Here are some questions that are probably top of mind:

Will you still have coverage?

No. When your term life insurance ends and you're still alive, you've outlived the contract. You no longer have the life insurance contract on the expiration date. That means your loved ones can't receive a death benefit from this contract, and you can't get additional financial benefits or cash back from not using it.

Do you need to cancel your term contract?

If you decide not to extend your coverage (or if it isn't an option for your current contract), you don't need to do anything before the contract ends. On the end date, the contract expires.

You may cancel your term life insurance contract any time before the term ends. Often, unlike with some permanent insurance contracts, you don't have to pay surrender charges or cancellation fees. But, unless you cancel within the specified "free look" period of coverage (usually at the start of the contract), you don't receive any refunds for canceling.

How far in advance should you look for new life insurance coverage?

If you're thinking about extending coverage or getting a new contract, begin looking around six months before the end of your term coverage. You may need time to determine how much life insurance you need and go through the new application and underwriting process, which can take two months or more.

How much life insurance do you really need?

Find out how much coverage you need to protect your loved ones' financial future.
Try our free life insurance calculator

Options after your term life insurance ends

You have a few options when you outlive term life insurance coverage. Before deciding, speak with your family and consider your needs. There's no correct answer; it's what works best for your financial situation. Here are the different paths you could take:

Renew your term life insurance

Sometimes, life situations change, and you may need to adjust your coverage to help meet your family's financial needs for a bit longer. So, you may want to know how to extend term life insurance. Depending on the contract, you may be able to renew your contract through a renewability clause.

If you can renew, it's often on a year-to-year basis up to a certain age, which may be well into your 90s. Continuing coverage keeps your death benefit, and you likely won't have to go through the underwriting process again or get another medical exam. And if you reach a point where you don't need coverage anymore, you can cancel it without a penalty.

However, your insurer may increase your premium each year you extend. Depending on coverage costs, your budget and if your death benefit needs have changed, it may not make financial sense to renew year by year. Instead, you may want to purchase a new contract.

Convert your term contract to permanent coverage

If your contract allows, you may be able to convert your term life insurance into a permanent life insurance contract before the end of the term. It's important to review the terms of your policy to understand if conversion is allowed. If allowable, a term conversion may allow you to continue coverage by converting into a permanent policy.

Converting your coverage before the end of a term life contract has a few benefits. Your premiums are based on your age at the time of conversion, so in this case, the earlier the better. You also may not need a medical exam, which could be helpful if your health has deteriorated. Plus, a new permanent contract can cover you for the rest of your life.

If you're considering a term-to-permanent life insurance conversion, check the dates for conversion. Conversion provisions are different for each policy, so it's important to understand when your conversion period expires. Depending on your contract, you may need to plan the conversion a year or more in advance.

Buy a new term or permanent contract

When your term life insurance ends, purchasing a new term or permanent contract can offer continued security for your future. However, review your current finances, future goals and loved ones' needs before deciding.

You might find better value in a new term contract if you're younger and healthier, getting continuing coverage at more affordable rates. If you're an older adult or have health concerns, permanent coverage offers a lifelong safety net but typically at a higher premium.

Also, consider your future financial commitments because that can affect the coverage you need. Are you closer to retirement or just starting to build a family? Different life stages can impact the type of contract and amount of financial protection you need for your loved ones if you pass unexpectedly.

Go without life insurance

Going without a life insurance contract may be an option you're comfortable with if your financial obligations don't require it anymore. If you're older, don't have anyone depending on your income and don't have debts, you may not need a life insurance death benefit.

You may be able to purchase final expenses insurance or funeral coverage instead to help cover those costs so your loved ones don't have to pay out of pocket. Or you might buy a life insurance contract with a smaller death benefit to help them cover those expenses.

However, if you have family or others who rely on your income, not having life insurance could leave them vulnerable. They may not have the resources to cover expenses like housing payments or child care costs without your financial contribution. The income coverage offered by some employers, while affordable, often isn't enough.

Get help with the next steps

Deciding what to do at the end of a term life contract is a big decision that should align with your financial needs and life goals. Whether you opt for another term contract or convert depends on many factors.

Going without coverage can expose your family to financial uncertainty, so consider aligning your life insurance strategy with both your current circumstances and your future needs.

A financial advisor can help provide tailored advice based on your personal needs, financial obligations and long-term goals. Connect with a Thrivent financial advisor for help making the best decision for you.

If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.

Insurance contracts have exclusions, limitations and terms under which their benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer.