Term life insurance is the simplest form of life insurance with no additional reserve set aside for cash value growth. Instead, the insurer takes your premium dollars and invests those dollar to provide your beneficiaries with death benefits when you die. When your policy matures, you should know what your options are.
There are two types of term life policies. The first type is an annual renewable term life insurance policy. These policies mature every year. Term life insurance with level premiums will have a set maturity date several years out into the future. For example, a 10-year term policy matures in 10 years. A 20-year term policy matures in 20 years.
When your annual renewable policy matures, on your policy anniversary date, you must renew it. When you do, the policy continues for another year at a higher premium rate. The policy automatically renews up to a specific age limit determined by the company. Normally, companies allow you to carry your policy up to age 84 or 85. With level term life insurance, your policy converts to an annual renewable term policy at the end of the term. You may continue with coverage at annual renewable rates or purchase a new level term policy.
The benefit of some term policies is that they will allow you to convert your term life insurance policy without additional health exams. If your policy allows for a conversion, you simply continue coverage under an extended level term. Maturity dates also prevent your policy from continuing indefinitely. This keeps the premiums lower than they would be under a permanent policy, which provides for lifetime payment of premiums.
Your policy may not have a convertibility feature. In fact, unless the policy specifically provides for convertibility, then you don't have a convertible policy. If you renew your level term policy under this scenario, you must fill out another application and undergo additional underwriting (health exams). Additionally, any time you renew a policy, whether you are allowed to convert it or not, your premiums increase with the renewal.
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