Many Americans choose term life insurance over whole life insurance because it’s more affordable, but despite low premium prices, there’s a critical caveat: policyholders who purchase a 30-year policy run the risk of outliving their coverage.
Individuals whose term-life insurance runs out always have the option of purchasing a new term policy, CBS Money Watch reports. However, they will have to undergo a medical exam and pay the premiums tied to their age and health, which may be higher than the original policy. They may save money by shopping around and comparing the prices of different insurance companies instead, Money Watch suggests.
Those in poor health have the option to convert their term policy to a permanent one, albeit at a higher price. However, there is no medical exam and individuals may be able to offset the price by purchasing a smaller policy, the website reports.
If you are choosing to purchase a term policy but are concerned about outliving the length of your policy, you may want to look into a policy with a convertible clause. They may cost more initially but are worth the expense, according to Bankrate.
A convertibility clause allows you to convert within your allotted time. For example, you can purchase a 20-year term with a 10-year conversion clause. If in year nine you develop an illness, you can convert without the need of a new physical exam.
While most don’t revel in carrying higher premiums than their original policy, it may be worth it to know that beneficiaries and loved ones will be taken care of in the event of the policyholder’s death.