Does life insurance expire at a certain age? This is an endless question that might on people’s minds when they propose a life insurance for the first time. Considering that life insurance ensures the way you provide your loved ones with a great gift of protection as you pass one day, it is crucial to know the life insurance policies, one of which is about the period of policies expiration.
Yes, if you consider purchasing a life insurance policy, questions about policy expiration may keep arising on your mind. Well, the answer to this question depends on the policy itself and each providers may have different policy from the other.
Now we would like to give you an understanding about whether life insurance expires at a certain age or not. If it does, then when does it expire?
Contents
What Is Policy Expiration?
Policy expiration is defined as the time when the policy’s coverage ends. This also refers to a cancellation or termination of life insurance policy. Simply to understand, when a life insurance policy ends, you cannot use it anymore. Or, you don’t have the insurance because you reach certain age. In this case, each providers have their own policy in determining how long the period of a life insurance. Thus, your life insurance expiration depends on your provider’s policy and particularly depends on what type of life insurance your provider use.
Types of Life Insurance Policies
Generally, there are two types of life insurance policies that are available among the providers. Those are permanent life insurance policies and term life insurance policies. As their name suggests, permanent life insurance policies provide the insurance coverage for your entire life. On the other hand, the term life insurance policies provide the insurance coverage only for specified amount of time.
Permanent Life Insurance
Permanent life insurance, as we have mentioned, is available for your entire life. Thus, it does not expire. Thus, if you are asking; does life insurance expire at a certain age? If you take a permanent life insurance, then it does not expire. This type of life insurance offers coverage for a full lifetime of insurance.
Yes, unlike the term life insurance, permanent life insurance refers to the coverage that never expires. Most permanent life insurance combines a death benefit using the savings component. Permanent life insurance consists of two primary types; the whole life and the universal life insurance.
Permanent life insurance policies work well with the favorable tax treatment. The growth of the cash value is usually based on the tax. This means that the policy holders don’t pay tax on any income as well as the policy is still active. Even when you withdraw up to the premium paid total payment, you won’t pay the tax.
Permanent life insurance policies are also much higher than the term life insurance where the savings component and the death are no longer available after a particular time of years.
Different from the term life insurance, the permanent life insurance lasts for a lifetime as long as the non-payment of premium doesn’t causes the policy to lapse.
The owner of permanent policy insurance is allowed to borrow funds against the cash value or withdraw the cash to meet the needs of paying either the children’s education fee or covering the medical expenses.
Due to the fact that permanent life insurance last for a lifetime and it never expires, however, you can cash it out by borrowing against your policy, withdrawing money from the cash value and surrendering the policy.
There are some benefits you can derive from purchasing permanent life insurance. First, it provides a death benefit to your beneficiaries. Second, it allows for investing in an account with a tax benefit that you can borrow and use during the policy’s lifetime. Well, you can get all of these benefits if you purchase the high premium.
The only downside is the high cost of the premiums that might cause you unable to pay and spend down the cash policy.
Term Life Insurance
Does life insurance expire at a certain age? If you purchase a term life insurance, it will usually expire well before the policy holder’s life ends. This term life insurance is aimed to help people pay debt and other financial obligations, leaving the insurance unnecessary and leading people to turn into the permanent life insurance.
Due to this reason, may term life insurance policies offer choices on converting the term life insurance to the permanent type later without taking any qualification again like the exams or other requirement. This offering makes the conversion more interesting to people with medical issues and chronic health problems that require on-going expenses from the insurance or savings. Further, life insurance is more affordable.
Term life insurance policies come with various specified terms. There are varieties of length of time available for those who want to purchase term life insurance. Based on the Insurance Information Institute, the general term lengths are available at:
- Yearly / renewable
- 5-year renewable
- 10-year renewable
- 15 year
- 20 year
- 25 year
- 30 year
- Term to a specified age which is usually 65 age.
The term life insurance ends or expires at the end of the specified term of the policy. In other words, it expires at a certain age. So, if you are asking; does life insurance expire at a certain age? Yes, it does, when you choose term life insurance to a specified age.
Permanent Life Insurance Vs. Term Life Insurance: Which Is Better?
Both types of life insurance can basically help protect your beloved families financially. Whichever type of life insurance you choose, it is recommended that you purchase the premiums. The permanent life insurance lasts longer and even to your lifetime but it is much higher than the term life insurance.
What To Do When (Term) Life Insurance Expires
As you are new to life insurance, it is always possible that you feel as if it was very confusing when it comes to decide what to do if your term life insurance is expiring.
As the name implies, a term life insurance provide coverage for a particular term or period of time which is typically 10 to 30 years. In addition, a term life insurance is designed to provide a payout to your beneficiaries when you pass away during the term.
What if your term insurance comes to an end? There are some options to choose from, especially if your children are already mature and you have enough assets to take care of your spouse. Certainly, if your families still need the financial protection of life insurance, then you must consider doing the following actions:
Extend Your Current Term Policy
As the term life insurance is renewable, you can always extend it on a year-to-year basis until you reach 95 years old. This is due to the fact that most of term life insurance policies are provided with a guarantee of renewability feature to allow for extending the insurance coverage without going through a new requirement and medical exam. However, the insurance company will automatically change your premium as you extend. Well, this just make sense to some people. However, it is not always the best option for others.
There is one reason why people like to extend their term life policy; a change in health. If you are diagnosed to have a life-shortening illness, you may not have qualification for extending your term policy. However, for people with the difficult health condition will have this option as the best way to provide financial confidence for their loved families.
The only downside to extending the term policy is the fact that the renewal for premium usually increases more every year.
Convert The Term Policy To A Permanent Policy
As we have mentioned earlier, when a term life insurance comes to an end, there is an option to convert it to a permanent policy. This is very possible only if your insurance company provides the choice. Mostly, if you want to convert your term policy into a permanent one, you don’t have to provide any evidence of insurability. However, different life insurance companies have definitely different ways of managing the term-to-permanent conversion. After all, what you need to always do is to check with your policy to see what options are available.
One advantage of converting the term policy into a permanent policy is the fact that you don’t have to provide evidence along with the medical exam. On the other hand, the disadvantage is the limited set of permanent policy options available to choose from.
Look For Different Life Insurance Policy
The third option you may consider taking into options is looking for different life insurance policy. If you are thinking about how life has changed so fast, you will think of taking action when your life insurance expires, right?
It is always possible that you have more savings in your bank account and there is no need to take the same amount of life insurance coverage. Well, you can actually look for different life insurance that are available in a wide range out there.
Note, the types of term life insurance policy that ranged from 10 to 20 years ago might not the best option to meet to today’s need. So, this option can be a great change to fix it.
This option offers one pros; affordability! Meanwhile, the cons is that you must provide evidence of insurability with the new medical exam.
Nonpayment Can Make Life Insurance Ends
Regardless to whatever type of life insurance you take, either the permanent or term one, it can break because of nonpayment. Thus, the coverage ends. In this case, a life insurance policies typically offer a grace period of time for paying the premium. So, it is highly recommended that you always check with the terms and conditions of life insurance policy whether it has grace period.
If the policies offer the cash value, reducing the paid-up or non-forfeiture choices is allowed. Generally, to be “Paid-up” means that you have paid the insurance but the policy is still in-force. When your policy isn’t paid up, you have an option to completely stop the premiums and in turn, you will receive a reduced death benefit. In most cases, this makes you lose the cash value. And, this is called “reduced paid-up option”.
Another option is converting the whole life policy into an extended-term life insurance policy. However, it depends on what options are provided by your insurer.
Conclusion
Does life insurance expire at a certain age? That depends on what type of life insurance you purchase. A permanent life insurance never expires while the term life insurance can expire at a certain age which is usually 65.
