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What to Do When Your Term Life Insurance is Expiring

Feb 27, 2024 2 min read

As you experience different life stages, your life insurance needs will inevitably change. Along with those changes come questions. What happens at the end of term life insurance? Can I extend my term life insurance policy? When you purchased your term life insurance policy, you made a good move that helped you protect those who matter most to you or a business you鈥檝e worked hard to build. But when your term life insurance policy is expiring, you may be wondering what comes next.

There鈥檚 good news: you have several options to consider based on what fits your needs now and in the future.  

Here鈥檚 how to decide what to do when your term life insurance expires and set yourself and your loved ones up for a safe and secure future. 

What Options Are Available for Conversion When Term Life Insurance Expires? 

Convert to Permanent Life Insurance  

Term life insurance is designed to provide temporary coverage for a specific amount of time 鈥 it could be 10, 15, 20 or 30 years. This coverage provides protection during the term, but once the time is up, your term policy will either expire or your premium could increase significantly. 

When an eligible term life policy expires, you can often convert it to a more permanent option that will cover you throughout your life and never expire. Options may include whole or universal life, which often have higher premiums but more comprehensive benefits. 

Choose a Partial Conversion

Maybe you鈥檙e not ready to convert your entire term policy, or you need a lower payment. Some companies allow partial conversions. This means you take part of your term policy and convert it to a permanent policy. You would then have two separate policies: one term and one permanent. This option is often used when you may not be able to afford to convert the full policy amount, but you鈥檇 still like to have some permanent coverage. 

Why Convert Your Term Life to a Permanent Policy? 

Unlike a term policy, permanent life insurance policies build a cash value over time. You will generally be able to access your life insurance cash value through a policy loan or withdrawal for emergencies, supplemental retirement income and more.1 

The good news is that when you convert your term policy, generally you won鈥檛 have to go through the underwriting process again. That means you won鈥檛 have to submit to a new medical exam in order to buy a new policy. In addition, you may be eligible for a premium credit. The credit lowers the premium amount you鈥檇 pay on your permanent coverage in the first year. 

It won鈥檛 cost you to convert your term policy to a permanent coverage option, but it is important to note that permanent life insurance typically costs more than term. The cost reflects the more comprehensive coverage and the cash accumulation opportunities. Remember that you have different life insurance needs at different times in your life, so evaluate your life situation and make a choice that鈥檚 best for you. 

Get the Right Fit

Life insurance is an important element of your overall financial well-being. Don鈥檛 let your term life policy expire without a plan. Your local Farm Bureau agent can help you determine the best path forward and the best time to make that change. 

1 Any loans from the policy鈥檚 cash value will reduce the policy鈥檚 cash value and death benefit if the borrowed funds, plus interest, are not repaid by the time of your death. Further, if your life insurance policy is classified as a Modified Endowment Contract (MEC), distributions, including loans, may be taxed less favorably than non-MEC policies.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.