Friday, 19 April 2019

Marc A. Hebert’s Money Sense: Help! My term life insurance is about to expire – The Union Leader

GENERALLY, one of the most cost-effective ways to address a life insurance need is through term insurance.

Term insurance provides coverage at a fixed premium for a limited period of time. Time frames can range from 10 to 30 years. One example in which term insurance might be helpful is with a young family. Term insurance might provide the protection needed after marriage or the birth of a child.

Given this, you may have an existing policy that was purchased years ago. You have been paying the premiums and not given the insurance coverage any more thought. Since the length of a term policy is fixed, the coverage will eventually run out in the future. Before it does, it is important to review your options.

The starting point for such a review is deciding if you need the coverage in the first place. If the insurance was intended to pay for a child’s education and that child has graduated from college, the need is no longer there. Maybe the insurance was to pay off a mortgage on a home. If your mortgage is paid off, the need may have gone away. The point here is to examine what life insurance needs are still relevant and need to be addressed. One possibility is to provide income support to a surviving spouse until retirement is possible.

Now is the time to review your existing policy’s details. Some term policies allow the insured to renew the coverage. You probably won’t need to take a medical exam, however, the policy’s rate will usually increase as you get older. It might be an option to consider if you are in poor health. Take the time to review your policy specifics and limitations.

If you review your finances and decide you still need coverage, what are your options? One might be to purchase a new policy. This could work if your health is good. A new policy requires the need to pass another medical exam since the insurance company will want to make sure you are an acceptable risk. As you are now older, your premium may increase, but the length of time you need the policy to cover expenses may be shorter. This can help lower the cost. Shop the coverage for the best price.

Another possibility is to convert your policy to a permanent life insurance product. Some term policies are specifically designed to do this. Permanent products are meant to remain in force for an insured’s entire lifetime as long as premiums are paid. Examples of permanent insurance include whole life, universal life, and variable universal life policies. A medical exam may not be required. Be sure to determine whether or not there is a deadline for conversion. Most often the deadline is before the term life insurance policy runs out.

A benefit of permanent life insurance is that it lets you build up cash value in the account. You can withdraw money from the policy, but doing so may leave your beneficiaries less money when you die. There are expenses to consider with permanent products, such as mortality and administrative expenses. The policy may also have a surrender charge to consider if you want to cash it in. The financial strength of the insurance company should also be considered, especially if the policy has to last your lifetime.

If you are in doubt as to what to do, discuss your options with your agent or financial adviser. Do so well in advance of your current policy’s expiration. Together you can make an informed decision.


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