Unless your policy is renewable (at a higher premium) or convertible to a permanent plan, your term insurance ceases to exist. Any monies paid in is pure cost. There are some term plans that offer Return of Premium riders at an extra cost. Unless you die during the term period there is no equity in a term policy.
When your Term life insurance ends, it will usually jump up in price by a huge increase, and this price can then go up every year. So most people choose to purchase a new policy at that time, if they are able to qualify medically or age-wise for a new policy.
If you have a conversion option, you can convert your Term insurance to Permanent, even if your health has declined, if you convert within the time frame allowed. This also will cause a big price increase because you are then purchasing permanent insurance at an older age than when you bought your Term policy.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
What happens when your term life insurance ends?
What will happen is this: you will take out your checkbook, remember what your premium used to be, breathe heavy sigh, and then make your check payable for a much larger amount. In my career I have seen renewal premiums literally 10 times the original rate. Yes, 10 times.
Doesn’t always happen, but it does happen. And you will not know how high the increase will be until you get your renewal notice. They don’t tell you in advance.
Why would an insurance company slam you on the renewal?
Several factors could be involved. One is that they are a little bit concerned about their reserves. They need to bulk up.
Another could be that they feel the credit market is a little bit tight. So they need to store up some money in case they can’t go out and get enough new money.
Perhaps they feel the whole block of term business is not profitable. Maybe there is a big fat insurance company lurking in the wings ready to buy them, and they consider the term business to be a liability. So they will jack up the rates to get rid of a lot of policies.
(To tell you the truth, I need to learn a little bit more about this last reason myself. Most people keep paying term premiums, don’t die, and then drop their policies anyway. So the insurance company has received a bunch of money without paying any out. Why not keep the renewal rates more reasonable to hold onto these customers?)
But the net result of these high renewals is that the only people who hold on to their policies are people who really need the coverage, and feel they have no other option. They feel that their medical history or lifestyle risks would make them ineligible for coverage, or make a new policy too expensive.
The fact of the matter, though, is that they may indeed qualify for a better rate elsewhere. They should get prequalified and really see what the market has to offer. They may very well be surprised.
And if they don’t get a better deal, then the term conversion rider in their policy may be an option. As long as they are not over the maximum conversion age, they could lock into permanent rates. And they don’t have to convert the entire face amount at once: it could be done in stages, to better manage cash flow.
Thanks for asking.
Want to learn more? Review my blog at planrisklive.com.
.JPG){kind=avatar}
If you have a conversion option, you can convert your Term insurance to Permanent, even if your health has declined, if you convert within the time frame allowed. This also will cause a big price increase because you are then purchasing permanent insurance at an older age than when you bought your Term policy.
What will happen is this: you will take out your checkbook, remember what your premium used to be, breathe heavy sigh, and then make your check payable for a much larger amount. In my career I have seen renewal premiums literally 10 times the original rate. Yes, 10 times.
Doesn’t always happen, but it does happen. And you will not know how high the increase will be until you get your renewal notice. They don’t tell you in advance.
Why would an insurance company slam you on the renewal?
Several factors could be involved. One is that they are a little bit concerned about their reserves. They need to bulk up.
Another could be that they feel the credit market is a little bit tight. So they need to store up some money in case they can’t go out and get enough new money.
Perhaps they feel the whole block of term business is not profitable. Maybe there is a big fat insurance company lurking in the wings ready to buy them, and they consider the term business to be a liability. So they will jack up the rates to get rid of a lot of policies.
(To tell you the truth, I need to learn a little bit more about this last reason myself. Most people keep paying term premiums, don’t die, and then drop their policies anyway. So the insurance company has received a bunch of money without paying any out. Why not keep the renewal rates more reasonable to hold onto these customers?)
But the net result of these high renewals is that the only people who hold on to their policies are people who really need the coverage, and feel they have no other option. They feel that their medical history or lifestyle risks would make them ineligible for coverage, or make a new policy too expensive.
The fact of the matter, though, is that they may indeed qualify for a better rate elsewhere. They should get prequalified and really see what the market has to offer. They may very well be surprised.
And if they don’t get a better deal, then the term conversion rider in their policy may be an option. As long as they are not over the maximum conversion age, they could lock into permanent rates. And they don’t have to convert the entire face amount at once: it could be done in stages, to better manage cash flow.
Thanks for asking.
Want to learn more? Review my blog at planrisklive.com.