Buy A Brand New Life Insurance Policy
Only you can decide whether buying a brand new insurance policy is the right decision. If your financial needs have stayed level or increased, then considering a new policy with the right amount of coverage can be a smart option.
As with other choices, discuss your insurance needs with an experienced insurance advisor well before your policy expiry date. They can help you determine whether applying for new coverage is financially prudent. Even if you are rejected by an insurance provider for health-related reasons, the buffer time can be used to apply for a renewal with your current provider.
Shopping for a new policy requires work. But there are many advantages to choosing new coverage.
Firstly, there are several types of policies available to choose from such as a term life insurance, no medical and guaranteed policies, whole life insurance, and universal life insurance among many others. When renewing or converting existing coverage you are limited to the types of policies and coverage your current provider offers.
Secondly, if you are in relatively good health, applying for fully medically underwritten coverage will generally have a much lower monthly premium compared to similar coverage that was renewed or converted. Because the insurance provider is setting the rates based on your health, you no longer have to pay for the risk involved in their uncertainty about your health.
How Long Should You Keep Life Insurance
Tough question, and fundamentally, it boils down to what you want your life insurance policy to do. For instance, if its to pay off your mortgage, the term needs to be long enough to see that event through. So, if youve got another 15 years on your mortgage and you want the policy to pay off the outstanding amount, you might decide a 15 year term is all you.
If you consider your life insurance as a long-term investment for the folks you leave behind and also want it to pay for a top notch send-off loaded with bells and whistles, whole of life insurance may well be the right policy for you.
How To Sell Your Life Insurance Policy
If you want to get some offers on your policy, here is the process.
Typically you need to be over age 65 and in declining health to explore this option.
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Your Term Life Policy Is Expiring Here Are Your Options
If you bought a term life insurance policy a decade or more back and its about to expire you probably have a few questions about what to do.
After all, your life has likely changed quite a bit in the last 10 or 20 years. What kind of protection does your family need now? Can you extend your current policy and should you?
This article will help you answer those questions by telling you about:
Buying A New Term Life Insurance Policy
This, in a general sense, will be the best option for most people. Usually, those that buy term, dont want to own permanent life insurance.
They understand the risk and reward and feel more comfortable paying the lower premiums of term life insurance.
If your health hasnt significantly decreased, you can still, more than likely, get a good price on a term policy, and regain that peace of mind you had that your family will be protected.
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How Long Can You Keep Term Life Insurance
How long you can keep your term life insurance policy depends on several factors, which should be specified in the contract. That may include the following:
- Term length: The driving factor when it comes to how long you can keep your policy is the specified term length. This is the time period during which your coverage is effective. This period typically ranges from five to 30 years, increasing in five-year increments.
- Renewability: Many term policies are renewable to extend your term to as long as 35 or 40 years. If you opt for a yearly renewable policy, its renewable each year according to guidelines set forth in your contract. If your policy features guaranteed renewability, it means you can renew your policy without additional underwriting steps.
- Evidence of insurability: When purchasing term policies, the amount of coverage available to you may rely on your age and estimated retirement date. Many insurance companies want evidence that you qualify financially for the coverage terms you’ve requested.
Can You Cash Out A Term Insurance Policy
Can You Cash Out A Term Life Insurance Policy? Term life insurance cant be cashed out because these policies do not accumulate cash value during the limited time they provide coverage. However, some term policies have an option that enables the policyholder to convert them into a form of permanent life insurance.
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Hindsights 20/20 I Have A Short
So youre reaching the end of your life insurance policys term and just want to know your options.
The most obvious option is simply buying a new term life insurance policy. Of course, youll need to re-apply and go through the process all over again but it will almost always be a cheaper option than paying the premiums on your current policy after your term has run out.
Like I mentioned earlier, your premiums wont be as friendly as they could be, but almost always the best option.
What Happens If You Outlive Your Term Life Insurance Policy
What happens to life insurance if you dont die before the end of the term? Can you extend a term life insurance policy?
Well, that depends on your life insurance needs. Even though your term period has expired, your policy may still have value to you.
If you find that you still need life insurance protection at this point, you do have options for extending, converting, or renewing the coverage.
In some cases, your policy will simply become void. Youve paid a term life insurance company for years and wont get anything out of it other than peace of mind.
If youre lucky, your insurance policy will have certain clauses that help you to renew at a better rate, get a partial refund, or other benefits for outliving your policy.
In other instances, your life insurance might offer an annual renewable term. You should be aware that annual renewable term policy rates will increase. It would be cheaper to shop for a new longer-term policy instead.
When purchasing a term life policy, you may want to find a convertible term life policy. A convertible term life policy will allow you to purchase a permanent life insurance policy at the end of a term.
This is useful because it will allow you to pay a cheaper rate while you are younger and healthier. When you are older, the convertible term will ensure that you can qualify for a permanent policy even if you develop health issues or have family history concerns.
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Ive Decided To Get A New Term Policy Should I Get The Same Level Of Coverage I Had Before
Theres no good way to answer that without taking a look at your current situation and assessing who is relying on you for protection. Guardian can help you calculate how much coverage you may need and give you an instant quote online or we can put you in touch with a financial representative who can provide a more detailed estimate of your needs.
Converting Your Policy To Permanent Life Insurance
If you have a convertible term life insurance policy, you may be able to convert it to a permanent life insurance policy, such as whole or universal life insurance. Permanent insurance continues throughout your life as long as you pay the premiums. As with term insurance, permanent insurance pays a death benefit to your beneficiary at your death, but it also contains a cash value account funded by your premium dollars. When you convert your policy, you wont need to prove your insurability by taking a medical exam. However, there is usually a conversion deadline, which is the date by which you must convert, typically before your term life insurance is set to expire.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the claims-paying ability and financial strength of the issuing company.
The rules governing 1035 exchanges are complex and you may incur surrender charges from your old life insurance policy. In addition, you may be subject to new sales and surrender charges for the new policy.
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Can I Get My Money Back At The End Of My Term Life Insurance
This seems like an obvious no. Why would an insurance company take the risk of paying out a death benefit for a monthly premium as collateral, and then return your premiums if you outlive the policy?
There are actually 2 ways to get money back from your life insurance policy:
The first one is through the use of a Return of Premium Rider.
The first caveat to using this is you will not receive your ENTIRE amount of paid premiums if you cancel prior to the end of the term.
The other downside to owning this rider is that you will pay much higher premiums over the course of your policy for the privilege to get back the premiums you paid.
So, this all comes down to a trade-off that you have to decide which is right for you. Most people choose term life insurance as the least expensive option for protecting their family and income.
If you add this return of premium rider, it is no longer the least expensive option.
The short answer to the question of Do you get your money back at the end of a term life insurance policy, however, is no.
Unless you have a return of premium rider, or you convert your policy into a permanent policy, if you outlive your policy, you will not receive any compensation.
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Schimri Yoyo is a financial advisor with active life and health insurance licenses in seven states. Born in Haiti. Reared in Brockton, MA. Matured in Philadelphia. Schimri is a proud graduate of Arcadia University, having earned both a Masters in Special Education and an MFA in Creative Writing from the castle-riddled campus in Glenside, PA. By personality and by profession, Schimri is an educator…
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Determining Your Coverage Requirements When Your Policy Expires
As we mentioned, people sign up for a term life insurance policy with the hope that they never need to use it. But many feel it is a necessary investment to make to keep your familys financial future secure. This same frame of mind is required when exploring your options when your coverage has ended.
You need to assess your latest financial situation. Do you still have dependents? Is your estate sufficient enough to sustain them into adulthood? Is your mortgage still pending? Does your partner depend on your income to main their quality of life? Only an honest introspection into your finances can help you understand these future needs.
If you determine that youll need continued coverage then broach this conversation with your insurance advisor or broker 6 months before the maturity date. Any later and you risk getting caught in a coverage gap. This gives you enough time to study all the available options and choose the one that is best for you.
Dont Fall For The Bells And Whistles
As a final piece of advice, Ostro of PolicyMe says to watch out for specialized insurance you dont need. Like a fully-loaded car, life insurance policies can get jacked up with pricey features that dont always add up to more value for you.
Annual Renewable Term Life Insurance The upside: These policies start off very affordable, because your premium is always based on the risk that youll die in the current year. The downside: The rates increase year by year, and you may end up spending more than you would have with a single, guaranteed rate over the life of the entire term.
The upside: You can decrease the value of your policy over time. For example, you may need $500,000 in coverage today but only $250,000 in five years. The downside: The money you save in premiums is nominal for the amount you lose in the death benefit.
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Combine Several Smaller Policies
If you have health issues that make it difficult for you to buy a sufficiently large term insurance policy, you may still be able to cobble together a portfolio of smaller policies that will add up to what you need. These policies may not require a physical exam, but they may ask for some health information.
In addition to buying one or more small policies through an insurance agent or directly from insurance companies, you could be eligible for group life insurance through your employer, if youre still working, or through a trade association, college alumni club, or other organization to which you belong.
Some insurance companies submit your name to a company called MIB Group, which reports back the number and coverage amount for other policies you have. If the insurer believes you are applying for more insurance than you would reasonably need, it may deny coverage.
Picking A Term Life Insurance Length
To choose the best length for a term life insurance policy, consider the length of the debt or situation you want to cover. For example, if youre buying term life to cover the years until your children are through college, and thats in nine years, you might pick 10-year term life insurance. If you just bought a house and took on a 30-year mortgage, youre likely looking at 30-year term life.
Term life insurance is typically available in lengths of 5, 10, 15, 20, 25 and 30 years. Some companies are venturing into longer terms of 35 and 40 years .
The most common term life length purchased is 20 years, says Steve Robinson, vice president of partnerships for Legal & General America.
If your familys financial needs stretch past the typical term life lengths, you should consider a permanent life insurance policy such as universal life insurance.
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What To Do If Your Term Life Insurance Policy Is About To Expire
One advantage of term life insurance is that it is generally the most cost-effective way to achieve the maximum life insurance protection you can afford. Many people first purchase term life insurance to protect their familys financial interests after a significant life event, such as getting married or the birth of a child.
You may have done the same for your family when you purchased your policy years ago. And chances are, other than paying the premiums, you probably havent given it much thought since then. However, if your term life insurance policy is set to expire in the near future, its important to explore your options now before the coverage runs out.
Before you get started, you first need to reevaluate your life insurance needs and determine if anything has changed. Are your children grown and have they graduated from college? Do you have a mortgage? If you have financial obligations that you need to take care of, you may still need term life insurance. If you are nearing retirement and have fewer financial obligations than you did when you were younger, your need for a term life insurance policy may not be as great as it once was.
Are There More Term Life Insurance Conversion Options
Insurance companies that provide the conversion option with their term policies will provide at least one permanent product to convert to. Usually, it will be universal life or whole life.
Some companies allow conversion to any of their permanent coverages. Have your agent compile a list of options for you when you are considering making the switch.
It is important to note that insurance companies may change products over time, so a product that is available for conversion today may be discontinued in the future.
The conversion deadline will be listed in your policy, and this is the absolute deadline for converting your policy to a permanent plan. Most insurance companies do not offer a grace period on this time limit.
If you intend to convert your term policy, allow plenty of time for the conversion paperwork and processing.
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