Guides
Renewing term life insurance after the level period ends
Most term policies renew after the level period with no health check, but premiums climb every year. What to expect, what it costs, and what to do instead.
When your level term period ends, most policies let you keep the coverage without a new medical exam, but the premium resets to a rate that rises every year. The first renewal premium is often many times what you were paying. Renewal is a safety net for people who cannot get coverage elsewhere, not a bargain, so decide before the last level year whether you still need coverage and what the best way to hold it is.
What "renewable" actually means
A policy that is guaranteed renewable gives you the right to continue the coverage past the initial period without proving you are still healthy, as long as you pay the premiums. The contract states the maximum age to which this applies, commonly 95 or so for the final renewal, and includes a table of the maximum annual premiums the insurer may charge. Those tables are in your policy or its schedule pages.
The rule worth understanding is that renewal is annual. After the level period, each year's premium is based on your attained age: the age you have reached, matched against the guaranteed maximum rates. Your premium therefore goes up every birthday, for as long as you hold the policy. There is usually no second level period.
This is the same pricing that an Annual renewable term (ART) life insurance policy uses from day one. A 20-year term simply starts with 20 years of smoothed premiums and then continues like annual renewable term.
How big is the jump?
The 2021 Society of Actuaries study of post-level term experience, covering 25 U.S. companies over 2000 to 2017, found that in the most common design, first renewal premiums were "as high as 10, 20 or even 30 times" the level premium. The study also found that 27% to 96% of policyholders lapsed at that point (31% to 80% for graded designs), depending on the company and design.
The report also found that those who kept paying died at 154% to 1,066% of the mortality expected during the level period. That fits adverse selection: healthy people leave for cheaper coverage and the unhealthy stay, and the insurer prices the renewal rates for that pool. It is a main reason renewal rates are steep.
Two practical consequences follow:
- Renewal premium is not a market price for you. If you are healthy, a new policy is likely far cheaper than renewing. The renewal rate reflects those who stay.
- A policy that looks cheap at the start has a hidden second half. When comparing quotes, look at the guaranteed premium schedule after the level period, not only the first 20 years. Our guide to what to compare between term policies besides price explains what else to check.
Some policies use a graded design, where the premium steps up more gradually over a few years instead of leaping at once. Check which kind you have.
Your options when the level period ends
| Option | Health exam? | Cost | Works best when |
|---|---|---|---|
| Let it expire | No | Nothing more | No one relies on your income anymore |
| Renew at annual rising rates | No | Highest per year, rising | You are uninsurable elsewhere and still need coverage; you want a short bridge |
| Convert to permanent | No | Permanent-policy premium at your age; see converting term life to permanent: how the conversion option works | You need lifelong coverage and your conversion window is open |
| Buy a new term policy | Yes (new underwriting) | Often far below renewal rates if you are healthy | You still need coverage for a defined number of years |
| Reduce and renew part | No | Lower because the face amount is smaller | You need less coverage now |
Underwriting for a new policy will be done at your current age, so a 55-year-old does not qualify at the price of their 35-year-old self. But a new 10-year policy at 55 is still often cheaper than renewing the old one for ten years. A rough way to compare is to ask for the guaranteed premiums for years 1 through 10 on the renewed policy and add them up, then put the sum next to a new 10-year quote.
When renewing is the right call
The honest case for renewing:
- You have developed a health condition and would be rated very high or declined elsewhere.
- You need coverage for one or two more years: until a loan is paid off, a child finishes school, or a pension or annuity begins. Annual renewal can be a fair bridge over a short stretch.
- You are in the middle of a life event, such as divorce proceedings with a court-ordered coverage obligation, and want continuity.
The case against:
- Costs compound. The cumulative premium for several renewal years can become very large at older ages.
- You can keep it too long. Because renewal needs no decision, it is easy to keep paying while the premium rises and the need has already ended.
- You may be skipping better options, such as a new policy, a smaller policy or a conversion.
What to do in the last two years of the level period
- Check the date. Find the end of your level period and the exact renewal rates. The insurer's service line or your agent can send the premium schedule.
- Reassess need. Use the How much life insurance do I need? or the How long a term do I need? to see whether anyone still depends on your income, or whether savings and a paid-off home change the picture. The odds of outliving your term shows the odds of dying within a chosen number of years for context.
- Decide the amount and the number of years. Many people need less in their late 50s and 60s than they did at 35.
- Shop a new policy while healthy. Apply before the old one ends so you are covered either way. Do not cancel the old policy until the new one is in force. Read the new policy's the two-year contestability period terms.
- Check conversion rights. If your health is poor, the conversion window may be your best option, and it may close before the level period ends.
- Set up payment before the rate changes. Automatic payment prevents an accidental lapse when the bill suddenly grows.
A hypothetical example
Say a 55-year-old pays $60 a month for a $500,000 20-year policy that is about to end. The renewal schedule lists the first renewal year at several hundred dollars a month and rising each year after. She is in good health, her mortgage is nearly paid, and her husband has his own retirement savings, but she wants to protect his income for another decade. She asks for a quote on a new $250,000, 10-year policy, which turns out to cost well under the renewal premium for the same period, and buys it before letting the old one expire. The numbers here are illustrative, not quotes.
Key takeaways
- Renewal usually requires no exam, but premiums reset to attained-age rates and rise every year.
- The Society of Actuaries found first renewal premiums as high as 10 to 30 times the level premium in the most common design.
- Renewal is best seen as a short bridge or a last resort for those who cannot qualify elsewhere.
- If you are healthy, shop a new policy for the smaller amount and fewer years you still need before the level period ends.
- Check your conversion deadline and your premium schedule two years before the level period ends.