Firstly, you need to understand that there are several types of term policies, term life insurance policies, they are your traditional term policies and these are going to last for just a set period, and at the end of set period, usually, it’s 10, 15, 20, 25, or 30 years, the policy is over sometimes, you can extend past that time, and sometimes you don’t, and sometimes the period at which you can extend is going to be five years, sometimes it’s another 10 or 20 years but you need to know that at the end of the initial term period, it’s going to get a lot more expensive, so let’s say that per year, that says you got it years ago when it was cheaper and it was, let’s say, eight hundred and fifty dollars a year, for a term policy, it could go up to ten thousand dollars a year.
This is not an extreme situation, at the end of a 30-year term, not uncommon for it to jump that much, so really look at the pay schedule on that. Now as far as this kind of policy when that term ends, if you do not die and you outlive that term, it ends with a traditional term policy, you get no money back, and you have to go out and get re-insured probably with whole life because now you’re probably going to be too old to get term or it’s going to be too expensive to get a comparable term policy, go out and get a 10, 20, 40-thousand-dollar whole life policy and that policy never expires. They’re great for later in life, and by later in life, I do not mean old, I mean young, I’m talking of 60 years old but past the age of 60 or 65. Most people get whole life policies, now another kind of term policy that works differently if you have a return of premium, a term policy is a different can of worms with the return of premium term policy at the end of the term, you get all of your money back, not the policy coverage amount but every penny that you’ve paid into the policy, every penny comes back to you if it’s a hundred percent return of premium term policy and there are some options out there for this.
Now typically to get a return of premium term policy, it’s always going to cost more than a traditional turn because they’re adding that extra value in there. Have you got all your money back? They’re going to charge you more and this going to sound counter intuitive, it’s going to cost more for a shorter term, cost less for a longer-term with the return of premium. So you want to look at a 30-year return of premium term. The last thing to bear in mind with this kind of term policy is that not only is it going to cost more, and you’re going to want that longer-term to get that price down but you have to be younger to get it. Now the small number of companies that even offer this program wants you to be 50 or younger.
There are some options for 60 or younger but they do cost more, so 50 or younger is the sweet spot, but if you’re in your 50s, don’t fret you that know you want to sit down with an agent that has access to a lot of options, and you want to see what they can offer you and what it’s going to cost, at least, price it out. But a lot of people look at what is the return of premium cost, what is traditional term cost and usually they go for a traditional term cost. It can be twice as much price to get a return of the premium policy.
So I hope that this has been helpful, short answer again on what happens if you outlive your term life insurance policy if you don’t die, what happens at the end of the term, most policies just end and you have to go out and get re-insured almost like any other kind of insurance that’s out there. What is the return of the premium? You do get all your money back which is a wonderful thing, so I’ve got quite a few clients that are enjoying that benefit, and they know that as long as they continue their policy to the end, they’re going to get all their money back, so they have that money to look forward to at the end, and they know that during the policy, they’re covered for $300,000 or whatever the figure is. So I hope this has been helpful.
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