Even though life insurance is designed to keep your family protected in the event of your death, not all life insurance lasts for the rest of your life. Whether the policy terminates after the policyholder’s death or the insured individual fails to make premium payments, it’s always best to know what to expect at the end of a life insurance policy.
Fortunately, there are several ways you can plan for the expiration of a life insurance policy. From extension riders to policy renewals, you can rest assured your family will still remain protected when a term life insurance policy matures.
In short, life insurance policies can expire, but it’s a bit more complex than that. Whole life insurance policies, also known as permanent life insurance, provide coverage for the remainder of your life, unlike term life insurance which only provides coverage for a set period of time, often between 10 and 30 years depending on the contract. With both of these coverage types, policyholders pay premiums toward their policy. In order to receive all of the benefits life insurance has to offer, it’s important to consistently make these payments, or you run the risk of a cancellation.
In contrast to whole life insurance, term life insurance may expire or mature if the policyholder lives beyond their term length. Alternatively, a term life insurance policy matures when the policyholder passes away before the end of their coverage.
Even though whole life insurance policies don’t expire, they are still expected to end when the policyholder has passed away. Permanent life insurance policies have a designated maturity date, or the expected end date of a permanent life insurance policy. This estimation is determined after evaluating the commissioners standard ordinary (CSO) mortality table, which is used by life insurers to predict the mortality of a given demographic.
Eventually, a whole life insurance policy will mature. At this time, the policy terminates and the maturity value is paid out, which could be equal to the face amount or the cash value** that accumulated over the time the policy was active. If the policy owner is still alive when the maturity date comes around, they will receive the pay out. If not, the benefit will go to any identified beneficiaries.
At some point, a term life insurance policy will end. This opens up several doors for policyholders considering long-term plans for both themselves and their families. In order to keep coverage intact and maintain financial security for the future, it’s important to prepare for the expiration of a life insurance policy.
Simply put, the termination of a life insurance policy means the end of coverage. There will be no more premium payments, but also all benefits will come to an end. If the policy owner outlives the length of their term life insurance but they have maturity benefits, they may receive a portion of those premiums. Since life insurance coverage is important to have for anyone at any age, it is not recommended to let your policy expire. Instead, plan ahead when you know your coverage is about to end and create a long-term plan for insurance and financial stability.
Some term life insurance policies have conversion opportunities. This allows you to switch your term life insurance to a whole life insurance policy, which extends the policy length and provides a new set of benefits. Additionally, this process is often much simpler than going through an underwriting process for a new life insurance policy. Plus, term policy conversions can help policyowners switch to a coverage option that was not available with term insurance as a result of their age or health condition.
Let’s say you originally purchased a term life insurance policy because you were only able to afford the lower premiums. Now, your policy is set to expire but your finances have changed and you can afford more coverage and higher premium payments. Converting to a permanent policy is a simple way to maintain or expand your coverage without applying for an entirely new policy. Before converting from term to permanent life insurance, make sure to speak with your insurance agent about conversion options. Life insurance conversions are not available for all products, and might not be right for everyone.
If your health hasn’t drastically changed and you are satisfied with your insurance policy the way it is, there is always an option to renew it. This will provide some future financial protection without making any major changes to your current policy. Plus, some insurance providers allow policies to be renewed without an additional medical exam.
When renewing a term life insurance policy, you can expect some things to change, such as premiums. Premium amounts are determined by age and health. As a result, when you renew your term life insurance, your premiums can increase as you get older. If your health has stayed the same, your premiums likely won’t increase significantly.
Some permanent life insurance policies will have an option to purchase a maturity date extension rider (MERs) before the end of the policy. This type of policy rider is exactly what it sounds like – it pushes back the maturity date until the death of the policyowner or until they choose to terminate the policy.
In order to purchase an MER, the policyowner needs to know when their original maturity date is, and if there are any associated deadlines when electing for an MER. To know more about the details of your life insurance policy and options for extension riders, it’s best to speak with your life insurance agent.
No matter what kind of coverage you need, ELCO Mutual has life insurance products that fit within your budget and keep you protected. If you are coming to the end of your term life insurance policy, it might be time to consider a permanent insurance option. Whole life insurance policies from ELCO Mutual will not only give you peace of mind for the future, but also provide your loved ones with a financial safety net in the event of your death.
When comparing product options, it’s common to want to know more about the details associated with the end of a policy, especially when purchasing life insurance. Luckily, ELCO’s independent insurance agents are available to answer any of your questions about life insurance maturity and expiration. To get started or learn more about our whole life insurance products, reach out to our team today!
**Please note that dividends are not guaranteed from ELCO Mutual’s participating life insurance policies. Reach out to your insurance agent for information on cash value benefits from life insurance products.