Let’s suppose that you’ve had a perfect life plan and everything has been going according to your plan. You get married at the age of 27, you have 2 kids by the age of 30. You’re making your way towards higher designations in a company’s hierarchy. You’re getting steady salary increments and promotions.
You have a bit of savings, you’re planning on sending the children to school, and end up buying your own apartment by the age of 31. This might seem like a good life but have you ever thought, what if you die suddenly by some accident?
Would you still think that your life planning is perfect? Would you be satisfied with leaving your world, as is? Obviously, this is a huge setback and you have to be prepared ahead of its arrival.
Preparing for a journey is the most important step toward achieving your final destination. Similarly, in life one has to foresee the future with a bit of wisdom.
The most suitable manner for ensuring the financial safety of your spouse and children has been insurance, since times unknown. For younger and healthy people in their 20s, Term Life Insurance Policy is the most suitable option.
How long should my life insurance cover last?
You should always go for a 20-40 years term tenure if you’re young and relatively healthy and still in your 20s. Term Life Insurance Policy implies that it will give you insurance protection for a certain time period.
It is not everlasting but if a policyholder dies between the specified time, his beneficiaries, dependents, wife, children, and other relatives will get the Death Benefit payout. This is a way of increasing your life insurance policy coverage.
What happens after your term life insurance ends?
If you bought the term life policy for 20 years and now it’s about to end after 6 months. You must start looking for other options. If it ends, and the expiry date passes, you might be able to get insured again but the gap in between would not be covered by any insurer.
If you die in that gap, you’d be uninsured, this can be chaotic for your family members. First things first, research your options 6 months prior to your expiry date. When the term of life ends, you have 4 options of going about it:
- Renew current term life annually.
- Covert this term life to a permanent life policy.
- Research online, read reviews, shop around and buy a new term life policy.
- Let this term life policy expire and go without any life insurance in the future.
1. Renew Current Term Life Insurance Policy Annually:
This will help you stay insured without having to give a medical exam or undergo underwriting again with the same insurer firm. While it seems the most convenient, one has to bear in mind that with every passing year, the premium payments will rise.
While you can keep up with this for some years, it will remain a viable option for only some time, obviously. But instead of losing the Sum Assured Death Benefit of the last 20 years, this is still advisable.
2. Convert this term life into a permanent life insurance policy:
You can use the conversion rider of your term life policy and convert it to a permanent life policy. Permanent life policy is of two types: universal and whole life policies. Do remember that a permanent life insurance policy is 5-15 times costlier than a term life policy. It will be a pricey deal but the most stable fruit bearer for future crises for your dependents.
3. Buy a new term life policy:
Do not take this step lightly, this is the most cost-effective option selected by most policyholders after their 20-year term expires. You can reassess your dependents, coverage needs, your savings, and your life expectancy. Based on the new scenario, choose the term life which suits you most.
4. Let this term life expire and go without insurance:
Since only ROP Return on Premium term life insurance policy allows you to get a refund on your premiums, after expiry. Either one should opt for ROP the first time, or every time afterward too. But again this is way more expensive, where a face value of $500,000 term life would take monthly premiums of $30. The ROP term life with a face value of $500,000 would charge you monthly premiums of $121.
In case you have no dependents now, and you have a high-yielding savings bank account or real estate property assets, forgo the hassle of life insurance.
Recommendations
- Always choose a “Return on Premiums” term life insurance policy, if you’re low on budget.
- It is better to accumulate your money otherwise, paid for insurance premiums, in your high-yielding savings bank account.
- If you’re careless with money, never try saving, consult a reputed insurer or broker.
- You can skip life insurance only after attaining real estate huge assets.
- Liquefy these estate assets for the family’s future needs.
- Always ensure purchasing Burial Insurance, it is a minimal investment and compulsory.
- Similarly, you cannot forgo health insurance either.
- The best life insurance policies are Whole life and universal life insurance policies.
- Above mentioned two are permanent life insurance policies.
- Premium payments are on the higher side, but they offer level premiums.
- These are everlasting and offer Sum Assured Death Benefit Payout and Accrued Cash Value which builds over decades.