Life insurance is essential in providing a safety net and mental peace for our loved ones at our untimely demise. It generally comes in two different types, one of which is term life insurance plan.
Term life insurance provides coverage for a specific time, generally 10, 20, or 30 years. It is less expensive than permanent life insurance as it accumulates no cash value. But the most common query about this policy is whether you get Money back after the term ends. Well! To get an answer, you have to read the blog.
In this blog post, we will discuss various aspects of term life insurance and its payout or death benefit. Let’s get started!
Do you get Money back after the expiration of term life insurance?
Well! The answer is no. Once the term expires, the policy terminates, and no further benefits will be paid out to the beneficiaries. Most term insurance plans do not have a cash value component, so there will be no chance of Money being returned to the policyholder if they outlive the term.
However, there are some exceptions to this term. Some term life policies provide a return of premium riders. It means the policyholder will get all the premiums back if he outlives the term. It is one of the best ways to secure your Money and get it back, but it could be more expensive than a standard term life insurance plan.
Another exception occurs when a policyholder cancels his term insurance policy within the free-look period. Typically this period lasts 30 days after the policy is issued. During this time, the insured can cancel the policy and get a full refund of his premiums.
Refund of Life Insurance Premiums
Whether you get a refund of life insurance premiums or not depends on your policy type.
Term Life Insurance typically does not offer refunds of premiums. It is because it is a short-time plan designed to provide coverage for that specific time. However, if the policyholder outlives the policy term, he no longer has to pay premiums.
Whole Life Insurance, on the other side, offers you refunds of premiums. This policy has a cash value option, which means the insured accumulates Money with time. If the insured cancels the policy or passes away, the payout will be paid to the beneficiaries.
Moreover, universal life insurance plans also refund premiums as it is similar to whole life insurance. But the difference is they are more flexible regarding how the cash value can be used. For instance, the insured person can take the cash value as a loan or to pay for premiums.
What happens if I cancel my term life insurance?
If you cancel your term insurance plan, the policy will no longer cover you, and you will not get any refund of the paid premiums. However, if you cancel the plan within 30 days of applying for the policy, you may get all the amount you pay to the insurance company.
When you cancel your term life insurance, consider the pros and cons carefully. On one hand, you no longer have to pay the premiums and can save Money. While on the other side, you will no longer be covered in the event of your sudden demise, and you have to leave your loved ones financially unstable.
Why is term life insurance considered more affordable?
Term life insurance could be more affordable than any other type of life insurance. Below are the reasons why?
- Term life insurance is a temporary policy offering coverage for a short period. And the insurance company has to pay a death benefit if you die during the policy term. However, if you outlive it, the policy expires, and no further benefits will be paid.
- Unlike whole life insurance and universal life insurance, this policy has no cash value option. It means that the policyholder does not accumulate Money with time. The other two policies have a cash value component, and that Money can be used to pay premiums or cover daily life expenses. This option makes them more expensive as compared to term life insurance.
- Term life insurance plan is less risky for the insurer. The insurance companies must pay death benefits in case of whole life or universal life insurance. These policies also have a cash value, meaning the insurer must pay more. At the same time, term insurance is for a specific period, so the insurance company is less likely to pay death benefits.
According to these factors, term life insurance is more reasonable than any other type of life insurance policy. But at the same time, term life insurance does not offer coverage for your whole life, and if you want whole life coverage, you have to consider permanent life insurance policy options.
What to do if your term life insurance is going to expire soon?
If your term life insurance expires soon and you do not have premium riders, there is another option you should consider. Many insurance companies allow the insured person to convert a term life insurance policy into a whole life insurance policy based on your age. It is a great option that allows you to access a portion of the premiums you paid into the new policy as a cash source.
Final Thoughts
That’s a general review of the limitations of the term life insurance policy. We hope you guys got an idea about what and when term life insurance offers you a payout and what to do when your term life insurance expires. However, you can consider a term life insurance policy if you are young, as it is very affordable, and then convert it to permanent life insurance when you get older.