When Arizona Term Life Insurance Expires (Part 1)

When the end of the time period an individual has selected to be covered on an Arizona term life insurance policy arrives (typically 10-30 years) the policyholder may have several options.

By planning ahead several years in advance of the end of term life coverage, the policyholder may be able to convert the term life policy to a permanent life insurance policy without having to answer medical questions once again. Also, the new permanent life policy will likely be rated at the same risk level as the previous term life policy. To convert “term to perm” the policyholder must be aware of the window in which this is allowed. Term life insurance policies that have a conversion option (not all do) usually require the policyholder to convert to permanent life a number of years before the term policy ends. As an example, a 20-year term policy may require that conversion transpire within the first 12 years of the term life policy. Most policies also require that the policyholder be under the age of 65 or 70 to convert.

It may be possible to renew the term policy year to year at an increased premium. Not all term life policies offer guaranteed renewability. It may make the most sense to simply buy another term life or permanent life insurance policy if protection is still required. If protection is no longer needed to cover financial obligations, going without life insurance may be best.

When converting a term life policy there are several permanent life insurance options commonly available such as whole life, variable life, and Universal life insurance. Whole life is the most common. The policyholder likely has the option to convert some or all of the current term life policy to a permanent life policy. The premium will be higher whichever permanent life policy you choose. To keep the premium in check you may always lower the coverage amount.

The pros of converting term to perm whole life are that the premiums stay consistent, there is cash value, loved ones will receive a death benefit, and estate planning comes into play. The cons are that the whole life insurance policy will cost more, premiums never end if paying monthly (as opposed to an upfront lump sum payment) cash value is not as easy to access as say a checking or savings account, and interest paid on such policies is usually lower than other financial vehicles.