What To Do When Your Term Life Insurance Expires

When a term policy expires, you either renew it or shop the market to see if there’s a viable term that’s cheaper than the renewal. Which one wins comes down to two things: your health today and your age.

The thing to keep in mind is that you’re older now, so the premium will be higher regardless, and a new policy means qualifying all over again. That’s not a reason to sit still. Below are the five options you actually have, the deadlines that close some of them early, and how I decide between them as an independent broker comparing carriers, before the renewal kicks in.

What Happens When Term Life Insurance Expires (It Doesn’t Just End)

Most term life insurance renews at that time, but the renewal is usually hundreds of dollars more expensive, and it only goes until a certain age, typically 85. After that, that’s it. Until then you stay covered with no medical and no new questions, as long as you pay the new premium.

When someone asks me why their renewal is so high, the answer is almost always the same. They’re not over quoting you. What they’re offering is what’s based on the contract at the time you signed it, so the place to look is the policy itself, not the letter.

The other thing your contract decides is what happens after the first term, and this is where insurers really part ways.

If your notice came from RBC or Sun Life, I’ve covered those on their own: what to do with an RBC term renewal and what to do when Sun Life renewal rates jump. Either way, renewing is only one of your options, and if you’re still healthy it’s usually not the cheapest one.

Why Term Life Renewal Premiums Jump, and What It Means for Your Rates

The insurance company’s main concern is that someone’s not insurable anymore, and the way they mitigate that risk on a guaranteed renewal is the price. They have to renew you with no medical, so the renewal is priced as if you can’t qualify anywhere else. That’s why the offer can be four times what you were paying, or more.

None of those jumps had anything to do with the person’s health at renewal. The prices were written into the contract on day one, and they land the same whether you’re perfectly healthy or not.

Shopping the market has its own catch, though. A new policy is priced on your age today, and between 45 and 65 every extra year adds roughly 9% to 13% to the cost of a new 10-year term, based on current carrier rates. That’s the real cost of putting it off.

It’s not cheaper to do a ten and a ten. At the best rates the two paths come out about the same, but the second ten only costs that if you still qualify at 55, and if your health slips you’re paying the renewal or a higher premium because of your health instead.

So when the need runs twenty years, I’d rather lock in twenty years today. If you’re setting one up now, this is how I approach choosing a term length.

Your 5 Options When Term Life Insurance Expires, Compared

It’s not one size fits all. When a term policy runs out you have five options: renew it, convert it, replace it, reduce it, or let it go, and the right one depends on your health, your age and what still needs covering.

We look at all of them, because it’s rarely one way or the other. Sometimes it makes sense to convert 50% of the policy and put the other 50% back into a term policy.

Most people end up mixing two of these, like converting a piece for life and replacing or dropping the rest. Which mix works comes down mostly to one question: can you still qualify for new coverage? That’s where the decision really starts.

How to Decide What to Do Before Your Term Life Insurance Renews

The way around the renewal is to look at the broad market and see if you qualify there, and to do it before the renewal kicks in, not after. If you’re still healthy, a new policy usually wins. If your health has changed, the policy you already have becomes the asset, because it can be converted without a new medical.

So I don’t wait until the ten-year mark. This is the order I work in when I review a policy that’s coming up for renewal, starting about a year out.

Here’s a real one. A 62-year-old with a $200,000 10-year term got a renewal of over $330 a month, and we priced the ways out side by side.

The renewal didn’t make sense against any of them. Past that, I told the client the biggest issue is that one term lasts until 82 while the lifelong plan goes to 100, and that the decision really goes back to how you feel about it.

If your renewal is inside the next year, that’s the review worth doing now, before anything gets cancelled. You can compare term life insurance rates across carriers first, or talk to a broker directly and have every way out priced side by side.

Converting Term Life Insurance to Permanent: Deadlines, Costs and Term 100

If you convert, it’s based on the standard rate for someone your age converting, plus any rating you already carry, and there’s no new medical. Your health stops mattering, but your age doesn’t: as each year goes on, the conversion price keeps going up.

The other thing to know is that the right to convert has its own deadline, and it usually closes before the renewals do.

You also don’t have to convert all of it. Often what ends up happening is instead of doing 70,000 for ten years, you might do 30,000 that lasts forever, just because of the cost. A few insurers go further and let you restart the rest as new term.

As for Term 100: if it’s 400 a month, then it’s not a term to 85, it’s a term to 100, because that’s simply a lifelong policy. It’s usually among the lowest-cost ways to buy permanent coverage, and it’s not always cheapest at the insurer you already have. If your health is fine, the same lifelong coverage elsewhere can cost less than converting.

Before you sign a conversion, get these in writing:

• The guaranteed monthly and annual premium on the new coverage
• The exact effective date of the converted coverage
• The total amount payable when the conversion is processed
• How the term premiums you’ve already paid will be credited
• When the new coverage ends, if it isn’t lifelong
• The deadline for accepting the conversion

Then put the conversion beside new permanent life insurance quotes from other carriers. If you still qualify, that comparison is usually where the money is.

What to Do at Term Expiry If Your Health Has Changed

If something has happened where you’re not as healthy, the term policy you already have can be converted into a lifelong policy without a new medical. It’s a contractual obligation the insurer has, and that gives you some certainty. So don’t reapply blind: price the conversion, then see what the market will still offer you.

Here’s how that played out for one client. A 47-year-old with a $1,000,000 term renewing in a few weeks had already gone through a full application with another advisor, and the result wasn’t what they wanted. We converted the whole thing to universal life, a permanent policy with flexible deposits, and funded it to a horizon instead of for life.

If a health condition is part of the picture, the order matters more than the price. And if a full application later comes back cheaper, it usually replaces the simplified or guaranteed issue policy; the only reason not to is the new two-year contestable period. You can see current no medical life insurance rates here, or ask for all of them side by side, including after 70.

How to Replace Term Life Insurance Without a Gap in Coverage

We would first apply to ensure coverage works and is approved. From there, we put the new policy in place and surrender the old one or let it lapse. That’s how you replace term life insurance without a gap: the old policy stays in force and paid until the new one is in force, never the other way around.

Cancel first and you lose your fallback. If the new offer comes back worse than expected, the old policy is already gone, and we can’t go back in time on it. We can only go forward. Insurers say the same thing. RBC’s own advisor guidance is not to recommend cancelling existing coverage until the new coverage is approved and in force.

Let’s wait until we get a firm approval, and then you can execute on the surrender side of things. That’s what I tell clients, and firm is the key word, because approved isn’t the same as covered. RBC’s YourTerm contract is a good example: coverage only begins if nothing about your insurability has changed between the application and the coverage date.

For those few days you’ll hold two policies at once, which is normal during a switch. If the new application asks whether you’re replacing coverage, the answer is yes. Whenever you replace a policy, you have to do one of these write-ups: a replacement disclosure that records why you’re switching. Usually the reason is cost.

Replacing isn’t only something you do at expiry. One client of mine was three and a half years into a 20-year term when a new 20-year term came in for less than they were paying. As I put it to them, it’s not that you’re saving $3 a month now; you’re sort of saving the three years on the back end.

The trade is that hatched start. A new policy is a new contract, so its clocks start over: there’s a two-year contestable period, meaning that if something were to happen in the first two years, they will search everything to see if there’s something that conflicts against what the original application was. The two-year suicide clause restarts as well.

So answer every question on the new application as carefully as you did the first time, because those answers are exactly what gets checked if a claim comes in early. And if your health has changed since you bought the old policy, that old policy usually becomes the one to keep.

Do You Still Need Life Insurance After Your Term Expires?

Rather than lapsing a policy, you may have the option to decrease the amount of insurance, and at expiry that’s where a lot of people land. You still need life insurance if someone would be left short without it, and only for as long as that’s true. If nobody would be, letting it go is a perfectly reasonable decision.

How long the need lasts decides the type of coverage. With funeral expense insurance, we typically don’t want to do a term plan; we’d want a life plan, because that bill comes whenever it comes. A mortgage is the opposite. It ends on a date, so the coverage can too.

One thing people miss is coverage through work. Group life through an employer often ends or shrinks at retirement or at an age the plan sets, commonly 65, and while some plans let you convert part of it, the choices tend to be limited. A policy you buy yourself is yours. If your term runs out around the same time you retire, review both before assuming your total coverage carries on.

So before you cancel anything, ask whether you’d buy this policy today if you didn’t already own it, and whether it’s worth paying into. A client of mine at 61 was ready to cancel a term policy bought at 55. The numbers said keep it.

Either way, size it to today’s numbers: what’s left on the mortgage, who still relies on you, and what you’d want covered at the end. This is how to work out how much life insurance you need now, not what you needed when you bought the policy.

Common Questions About Term Life Insurance Expiring

These are the questions clients ask most when a term policy is coming to an end. The two answers that surprise people: term life pays nothing back when it ends, and using the renewal or conversion rights already in your policy doesn’t need a new medical.

How to Get Your Term Expiry Options Compared Before the Renewal Date

I don’t have a bias with any of these companies. I don’t work for any of these companies. I work for you as my client. So the simplest next step is to bring your renewal notice to an independent broker and have the renewal, a conversion and new coverage priced side by side, before the renewal date.

Protect Your Wealth has been an independent brokerage since 2007, working with nearly 20 insurers. There’s no fee for the comparison, and if the right answer is to keep what you have, that’s what we’ll tell you.