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What Happens After My 10, 20, or 30 Year Term Expires?
Let’s say you have a 10 year level term life insurance policy. What happens after the 10 years is up? Do you lose your life insurance coverage? Most people assume that if they have a “10 year term policy” or “20 year term policy” that their coverage ends at the end of the term. In most cases, this is not true.
Most term life insurance policies actually cover you to age 95. When you buy a life insurance policy, let’s say at age 40, you could buy an annual renewable policy, which goes up every year since you’re older and for insurance purposes, are just a little riskier to insure. So annual renewable life insurance policies are available, but they’re not very popular since the premiums go up every year. Your premiums for a $1,000,000 male non-smoker might be $250 for the first year. Then $265 in year 2, $275 in year 3, and so on, until 10 years later when you’ll pay about $450 for the coverage. This is an example of annual renewable life insurance.
Since most people would rather plan their budget around fixed expenses, many insurance carriers offer level term life insurance policies. In essence, they’ll still cover you until age 95, but for a fixed term, say 10 years, or 15, 20, or 30 years, your premium (payment) is fixed. In the example above for 10 year term life insurance, they would add up the premium for each of the first 10 years and divide it by 10, and that would be your premium for the first 10 years. So essentially, 10 year level term life insurance just charges you an average premium for your first 10 years you’ll be covered. Then in years 11 and up, or in the case above, from ages 50 to 95, it reverts to annual renewable insurance coverage.
If you can understand that, then you’ll see the importance of locking in as long of a level term as you think you might possibly need coverage, because once the level term is up, your premiums will skyrocket, and eventually become unaffordable.
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