The most fundamental problem with a term life insurance policy is that sooner or later the term is up, and you will need to renew your coverage. If you stay with the same policy, the premium will always be higher. And if you have held the policy for 10 years or longer, the premium will usually be much higher.
There are ways that you can deal with this that will enable you to keep a life insurance policy in force, but at a much lower premium level than what will be the case if you continue with the same policy.
Lower the death benefit
This is the simplest solution to dealing with premium rate shock. You can simply lower the amount of the death benefit coverage sufficiently to enable you to afford the premium. For example, if you have a $200,000 policy that ends after 10 years, you can continue the policy with a 100,000 death benefit – or even $50,000.
Usually when you take a term life insurance policy, you’re taking it for a term that will be long enough to cover a time of high life insurance need in your life. Once your term ends, your need for life insurance will be reduced.
For example, let’s say that you took a $500,000 policy for a term of 20 years when your children were very young. Now that the 20 years have passed, your children are likely to be either at the age of emancipation, or very close to it. You no longer need $500,000 in coverage, and can get by just fine with $200,000. The reduction in the death benefit will result in a substantial reduction in your premium.
Convert to a whole life policy
Many term life insurance policies enable you to automatically convert to a whole life policy at the end of the term. You will likely still have to reduce the amount of coverage in order to keep the premiums affordable – after all, whole life premiums are considerably higher than what they are for term policies.
But the major advantage here is that by converting to a whole life policy, you will lock in the premium levels for life. You will no longer be faced with the automatic increases in rates as each successive term ends.
Shop for less expensive insurance
Even though you are older, and possibly in a different health condition, by the time your original term policy ends, you may still be able to shop for a lower-cost insurance provider. At the end of a 10 or 20 year term, the company that currently holds your life insurance may have become uncompetitive price-wise. Shop around, and it is highly likely that you will find a company with more aggressive pricing.
Another important factor to consider is that not all insurance companies have the same view of either age or health condition. Some companies, targeting older, more established customers, may offer preferred pricing in your age group. Others may not charge nearly as much for common conditions such as high blood pressure. Whatever your age or health condition, shop around for the insurance companies that have the most favorable policies for people in your circumstances.
A new term life insurance policy will still be cheaper than comparable whole life
It is an unfortunate – but totally expected – fact that term life insurance becomes more expensive as you get older, or as you develop certain health conditions. Be that as it may, term life insurance is still significantly less expensive than an equivalent amount of whole life insurance.
No matter what, you will need to carry a certain amount of life insurance, and whatever it is, term life insurance is likely to be the least expensive option.
When you do shop for term insurance, be sure to get the longest term possible for your age. If a 20 year term policy ends when you turn 50, look to replace it with another 20 year policy, or at least a 10 year policy. That will prevent the more frequent premium increases that will come as a result of having shorter terms in your policy.
At a minimum, a 10 year term life insurance policy taken at age 50 will lock in your premiums for a decade. Sure, they will be higher than they were when you took your first policy at age 30, but you’ll still be buying yourself 10 years of level premiums.
None of these options are perfect, but they’re all better than the alternative – which is to have no life insurance coverage at all.
