In this blog post we’ll cover questions that we get asked on a regular basis about term life insurance. If you’re looking to buy a term life policy, maybe you have some of these questions as well and hopefully we can provide answers that will make term life insurance easier to understand.
You can read entire articles just dedicated to this topic. To keep things simple – Term Insurance expires. Typically you can get a policy and lock in the rate for a period of 10,15,20,25, or 30 years. After expiration you may be able to renew the policy but at much higher premiums. Whole Life is a form of permanent insurance. Premiums don’t go up, and as long as you pay the premiums the policy does not expire. People buy term because it’s cheaper and they may only need coverage for a period of time, like 20 or 30 years. Others buy whole life because they want a permanent policy and can afford higher premiums. You can read more about term vs whole life here.
What Happens When my Term Policy Expires
Most life insurance companies will let you renew your term life insurance after it expires, up to a certain age, like 95 for example. At expiration the premium increases, and continues to increase every year. If you are still healthy when the policy expires, you can usually get a better rate by locking in a new term period with an application for a new term life policy.
Does the Cost of Term Insurance Increase?
If you buy a level-term life insurance policy, your rate is locked in for the length of the term period, and does not increase. For example, if you buy a 15 year term policy, the rate is locked in for 15 years. Watch out for some carriers like AARP, and Globe Life who increase premiums every 5 years.
Do I Need a Medical Exam to Get Approved?
There are term life insurance policies that don’t require a medical exam. Generally there is a limit to how much coverage you can get (typically $250,000) and you have to be healthy to get approved. If you are in excellent health you will get a better price by getting a policy that does require an exam.
Can I Increase My Coverage in The Future?
Once you get a term life insurance policy you can’t increase the coverage. You can get an additional policy, or replace the existing one if it makes sense financially. Some life insurance companies will let you lower the coverage if that is something you want to do.
Can I Cancel Term Life Insurance or am I Locked Into a Contract?
Term Life Insurance isn’t like your cell phone contract. There are no early termination fees, and you don’t get locked into a contract. You can cancel anytime by stopping to pay the bill. You can call the insurance company, or tell your bank to stop authorizing automatic payments to the insurance company.