By design, term life insurance policies are set to expire or terminate at some point, whether the risk occurs or doesn’t. If you’re alive when this happens, you may be able to prolong, renew, or convert your policy to ensure cover regardless. However, for most people, especially the elderly, the mystery is the specific age to stop term life insurance and consider the alternate whole of life policy.
Using whole of life cover like the over 50s life insurance comes with numerous benefits. For starters, it allows you to pay constant premiums which makes it easy to plan and budget for. Also, insurers commonly qualify the applicants irrespective of their health or lifestyle. Moreover, if you die within the first year of applying, your nominees can still claim a return of the premiums paid.
How to know when to stop using term life insurance
Below are four factors that can guide your decision:
Status of the beneficiaries
Are your death benefit nominees still dependent? If those you wanted to cover when applying for term life insurance are no longer dependent on you, it might be time to stop financing your term life policies. Ask yourself whether you and your beloveds can live normally if your income stream suddenly cuts off. Do you have the means to cover your daily expenses and needs, including those that you provide for?
Your spouse’s capability
If your spouse is capable of supporting your dependents in your death, you can let go of term life insurance. Explore their capabilities carefully and discuss your decision with them. Consider whether they have risk management mechanisms to ensure your beneficiaries still get cover past the death of both of you.
Status of your expenses and responsibilities
Term life insurance policies, like mortgage insurance, can be helpful when you suddenly die. They assist in offsetting your expenses and responsibilities ensuring your family copes well thereafter. However, if you’re now past the age where your death has minimal costs and consequences, then term life insurance might be irrelevant.
Life insurance needs
Every new day you live is a chance to reassess your life insurance needs, their changes, and their effects on your death. For example, you might purchase a term life policy to help your children complete school even in your absence. If they accomplish that without your risk of death occurring, then term life insurance is no longer useful.
Always remember that your need for life insurance, whether term or whole of life, changes with every life event that matters to you. Some events can be temporary others a lifetime.
Why stopping term life insurance matters
The major shortcoming of term life insurance is that it offers no cash value. Put otherwise, it’s not an investment but rather an assurance that when you die your family will have financial security. It is paying for something that you or your family may never use, even if the possibility of needing it is there.
The irony of this downside is that it’s also a benefit since it makes term insurance policies more affordable. Whether you die or survive past your term, you’ll have accomplished the tasks or responsibilities that matter to you.
Whole of life insurance as an alternative
Unlike term life insurance, whole of life policies provide coverage throughout your life. It guarantees financial security regardless of your age, lifestyle, or health status.
Moreover, if you live long enough, the policy matures and you can cash in its funds as the contract ends. But with most of these covers having their maturity age between 95 and 120, chances are slim you will outlive them. Still, if you die before its maturity date, your beneficiaries will get the death benefits.
Whole of life insurance as an alternative to term life insurance is relevant if:
Your financial obligations, which need cover in your absence, still exist past the termination of a term life insurance contract.
Your current term life insurance policy is convertible. If your insurer allows you to exchange your term life policy for a whole of life one, this is a good opportunity to retain cover.
The term life insurance policy is no longer renewable. Some term-based policies have age limitations which may bar you from qualifying.
Do you have any questions regarding term life insurance? Share them in the comments below and we’ll be happy to help.