What Is A Life Insurance Term Date: Knowing When Your Policy Ends
The more you know about how life insurance works, the better prepared you’ll be to find a policy that suits your specific needs. Unfortunately, 54% of Americans have life insurance yet aren’t familiar with its terminology.
One of the terms you should know about before shopping for life insurance is a “term date.” Read on to find out what it means and how it works.
Term Date Defined
A termination date (or “term date”) refers to the day your life insurance policy ends. Most of the time, a term date is scheduled. For example, the term date on a 15-year policy will be 15 years after your contract goes into effect.
Other times, a term date might occur unexpectedly, such as if you decide you no longer want the policy. Insurance companies can also terminate a policy prematurely if a policyholder fails to repay their premiums on time. An insurance contract usually stipulates the grounds for termination.
What Happens When Insurance Reaches The End Of Its Term?
If you outlive your term policy, you can renew it or convert it into permanent life insurance. However, if you extend your policy annually, expect your insurance costs to rise as you age. Your insurer may allow you to renew at a better rate or offer a partial refund in some cases.
If you convert your term insurance into a permanent policy, you’ll have to do so within the conversion period. This period typically lasts between 10 and 30 years.
Alternatively, you can do neither and allow it to lapse. However, your insurer will keep the premiums you’ve already paid, and you’ll have no coverage.
Should You Extend Your Term Life Insurance Policy?
Keeping your policy in force usually results in higher premiums. This is because the older you age, the riskier it’ll be to insure you – insurers charge more to high-risk clients to offset potential losses.
If you’re thinking about renewing your term life insurance policy, consider how long you’ll need coverage for. Continuing your policy makes the most sense if you only need it for two to three more years. However, if you need coverage for a longer period, it might make more sense to purchase a new term or permanent policy.
Most life insurance companies will allow you to renew your term policy annually until the age of 95. If you have no dependents and a sizable inheritance, you may not need additional coverage at all.
If you decide to get a new policy instead of converting an old one, you’ll have to undergo the underwriting process again. This involves taking the medical exam for a second time, which half of Americans say is the biggest reason they opted out of purchasing a new policy. If you are in poor health, renewing your policy can help you get coverage without having to undergo medical testing.
A term date identifies how many years of coverage you’re entitled to. It also signals when you need to start thinking about renewing your policy.
If this is your first time looking into a life insurance policy, understanding the terms can help you make an informed decision. Expand your life insurance vocabulary with helpful resources from Wesley Insurance, LLC. If you have any questions about different policies, inquire with us today.