We all know that everything that has a beginning has an ending.
Life is no exception.
We often wonder what it would be like for our families when we depart.
Well, a life insurance policy guarantees them a better financial adjustment when we are long gone.
This is preparation for the inevitable.
A life insurance policy refers to a contract or agreement between an individual and an insurance provider guaranteeing payment of a death benefit to the named beneficiaries.
This is a legal binding document that ought to be honored upon proof of the policy holder’s death.
The insurer guarantees the payment to the beneficiary in exchange for the policy holder’s premium contribution during his or her lifetime.
The policyholder is required to pay a one-off premium followed by single premium overtime.
Once the insurer dies, the said beneficiaries are then paid according to the indicated percentages.
Outlived your Insurance?
A permanent life insurance policy is one that remains active for a lifetime until the policyholder dies or surrenders the policy while a term life insurance policy expires after an agreed number of years.
This article particularly focuses on the term insurance policy and what to do in case your policy comes to an end.
When an individual’s life insurance policy comes to an end, it is said that he or she has outlived their policy.
When this happens, the insurance holder has three major options to choose from; extending the coverage, renewing your coverage, and converting your coverage.
Extending your coverage
You have the option of continuing to pay your premiums after the agreed period forcefully since most life insurance policies do not expire until the holder is ninety-five (95) years of age.
This is the best option for individuals who cannot qualify for a new life insurance policy and need a two to a three-year extension.
The greatest advantage of a forceful extension is that there is no hustle for acquiring a new policy, however, the premiums you pay will drastically increase over time as you age.
Kindly go through your policy document in regards to extensions and premium increase for the years that follow.
Renew your policy
This is the least expensive option for outliving your policy.
This entails you applying for a new life insurance policy.
You can take advantage of the insurer’s renewal options or go ahead and find a new life insurance provider.
The process does not get easier with a change of company since in both scenarios you need to take an in-house medical check-up to gauge your health status, to determine whether you qualify for the life insurance or not.
You are always advised to still shop for the best rates and provisions.
This would entail in-depth research on the current life insurance offerings and premiums from different companies before you settle on the most favorable one.
The greatest disadvantage with this kind of arrangement is that you still have to prove that you are still in good health and if your health has deteriorated in any way you risk missing out on the coverage as well as your cost savings.
You can extend your savings on an annual basis.
This might end up being slightly expensive, however, it is a good way to keep your life insurance active.
More so, for convenience purposes, you can convert your life insurance to a lifetime policy which is still expensive but easy to get approval for even when your health is not at its best.
You can start a new policy which is the least expensive of them all, however, it is the most difficult to qualify for since you have to be in great health for you to qualify for the low rates.
The shakier your health is, the more expensive the rates.
Convert your coverage
Most, if not all, modern-day life insurance policies offer an option of conversion which is also referred to as an exchange option.
The conversion privilege provides for an automatic renewal or upgrade of the policyholder’s policy regardless of their current state of health.
The policyholder can switch from one policy to another without being subjected to a medical examination.
Quick pointer; if your insurance is more than five years old, check if you have a provision for this option.
If not, you can inquire about the same from your life insurance provider.
Some insurers that have this option allow you to convert the outlived life insurance policy to a permanent policy.
The conversion guidelines vary from one insurance company to another and it’s advisable to clearly understand the guidelines of your particular insurance provider.
Some companies will leave the option open, therefore, you can do your policy conversion before it expires while others only give you a window period of certain years after enrollment to do your conversion, after which you cannot enjoy this benefit.
There are some companies whose guidelines state that the determining factor for the conversion is age and once a policyholder goes past that age, they are unable to use this benefit.
The greatest advantage of policies that have this option is the simplicity of transitioning from one policy to another.
Conversion does not require a second application hence no medical check-up.
Since you do not provide any insurability evidence to upgrade to permanent life insurance, the premium amount remains almost the same to your initial costs.
This will be most beneficial for policyholders who need constant life insurance and have conditions that can disqualify them from the eligibility of acquiring a new policy.
With advantages come disadvantages, right?
Most insurances limit the number of policies available for conversions while others minimize the features and provision for permanent life insurance.
Some companies charge more premium costs with such kinds of conversions.
Since the conversions will be made considering your current age, some insurers might charge you slightly more than you used to pay for term life insurance since with age comes risk.
As we conclude our outlived life insurance article, we encourage you to not only look at cross-company costs but also cross policy costs since some conversion may end up with lower premiums than others.
Always consult your life insurance advisor before the expiry of your insurance policy.
Always make your application for any of the above options before the expiry of your policy to ensure a smooth transition for you and your policy provider.
Consider the circumstances as you near your expiry date and consider them in making an informed decision on the way forward.
Be informed of your life insurance policy’s terms of the agreement and understand the policy word for word and incases you do not understand, be inquisitive and ask the policy provider before pending your signature on it.
Remember that this is a legally binding document.