What Happens When Your Term Life Policy Runs Out?

There's a reason so many people are advised to buy term life insurance rather than whole life insurance. Whole life insurance, which covers you indefinitely, can be far more expensive, so much so that you might struggle to keep up with your premiums and risk having your coverage lapse. 

Term life insurance tends to be far more affordable, but it will run out on you after a period of time. And once that happens, not only will you not have any coverage, but you also won't be entitled to any sort of payday from your policy.

An option with benefits and drawbacks

You can commonly save a lot of money on life insurance by opting for a term life policy. But unlike whole life insurance, term life insurance does not accumulate a cash value.

So let's say you buy a $500,000, 20-year term life insurance and you don't pass away during the 20-year period your coverage is in place. Despite having paid premiums for two decades, you and your loved ones won't see a dime once that policy expires. 

What to do once your term life insurance runs out

If your term life insurance policy runs out on you and you feel you need continued coverage, you'll generally have to apply for a new term life policy. And in that case, you should expect to pay higher premiums for the same amount of coverage, since you're applying at a much older age than when you first applied.

That said, you may not need a new insurance policy once your term life coverage runs out. Let's say you bought a 20-year term life insurance policy when your kids were young to protect your family in case something happened to you while they were still minors. If, at this point, your kids are in their 20s and working, and your spouse is still working as well, you may not have a need for life insurance any longer. And in that case, you might as well save your money. 

If you decide to get a new term life insurance policy, you may also be able to buy less coverage. For example, maybe you bought a $500,000 policy when your kids were young. At this point, a $100,000 policy may suffice. 

You may also decide that you want to convert your term life insurance policy to whole or permanent life insurance so you don't have to worry about your coverage running out on you again. Policygenius says many term life policies offer this option, and the benefit is that you won't have to undergo another medical exam. 

However, permanent life insurance tends to be five to 15 times more expensive than life term insurance. So you'll need to think about whether you can afford those premiums. In fact, you may decide it makes more sense to just pump more money into your savings account than pay for another life insurance policy once your term life coverage runs out. 

All told, term life insurance doesn't last forever -- hence its name. You won't get money out of a term life policy if you don't pass away during your coverage period. However, staying alive is something to be grateful for, so don't be too upset if your term life coverage doesn't result in a payday.