What Happens to Term Life Insurance If You Don't Die?

Sean McGinn is an assistant director of Product Positioning in the Risk Products department at Northwestern Mutual.

If you have a term life insurance policy, or you’re considering one, you probably already know that it covers a certain length of time. Term life insurance policies might last for 10, 15, 20, 30 years or more.

But what happens to term life insurance if you don’t die before the end of the term? To answer that, it’s important to understand exactly how term life insurance works.

The basics of term life insurance

When you get a term life insurance policy, you are getting life insurance that will cover you for a specific period of time. Once you have coverage, so long as you pay your premiums, you will be insured. If you die while you are insured, your beneficiaries will get the death benefit.  

If you outlive your term (let’s hope this is the case), then typically one of two things happens: 

• The policy will simply end, and you’ll no longer owe payments or be covered, or 
• The insurer might allow you to keep your coverage by converting all or a portion of the policy into permanent life insurance.  

In general, term conversion is available on many term life insurance policies during a specified time frame. If you’re not sure where you stand, it’s a good idea to check your policy or contact the company as soon as possible.  With certain policies, the term conversion period—the time frame in which you can convert it—may end many years before the policy expires. 

On the other hand, some companies allow a grace period after the term policy expires. During this time frame, you might be able to still renew without undergoing a new medical exam.

If you convert your policy, the good news is that as long as you pay your premiums, the life insurance is permanent. Better yet, your policy will begin to accrue cash value with each payment that you make. That’s money that you can eventually access for any reason. But you’ll need to pay it back into the policy.

Comparing term and permanent life insurance

Term life insurance is a popular option for many people. It offers significant levels of coverage for relatively low premiums compared to a permanent policy with a similar death benefit. But the trade-off is that your term coverage will end someday.

If you’re trying to decide between a term vs. permanent life insurance policy, it’s important to understand how life insurance fits into your overall financial plan. It’s not an all-or-nothing decision. Many people purchase both term and permanent insurance. That way, they get the affordability of term while accessing the additional benefits and lifetime coverage of a permanent life insurance policy.  

If you already have term coverage and are approaching a conversion period or the end of your term, look into your options. Talk with your financial advisor and loved ones and consider whether converting your policy into permanent life insurance makes sense.

Find the right solution for you

Life insurance is an important part of your financial plan, so it’s worth thinking through your options before you make such an important decision. Your Northwestern Mutual financial advisor can help you understand how insurance works in your financial plan.

Your advisor can also help you see how your insurance and investments work together in a plan. By asking deep questions and considering the broad picture, your advisor can uncover potential opportunities and blind spots that you might otherwise overlook.