Guides
What happens when your term life policy expires
When the level period ends, coverage stops, continues at a much higher price or shrinks, depending on your contract. Your options and a timeline for deciding.
When the level-premium period on a term policy ends, one of three things happens, depending on your contract: the coverage simply stops, it continues at a premium that jumps and then rises every year (often until age 95), or it continues with a smaller death benefit. Nothing is paid back to you unless you bought a return-of-premium policy. Before that date you can usually keep the policy, convert it to permanent insurance, replace it with new coverage, or let it go, and the best choice depends mostly on whether anyone still needs the money and on your health.
What your policy does at the end of the level period
Check the "renewal," "premium" or "table of guaranteed premiums" section of your policy. A 2021 Society of Actuaries study of U.S. term policies grouped the possibilities into five designs:
| Design | What happens after the level period |
|---|---|
| Jump to annual renewable term | The premium jumps sharply, then rises every year. The study calls this the most common U.S. design. |
| Graded | The premium rises in steps over several years until it reaches an annually increasing scale. |
| Jump to a new level | The premium increases once, then stays level for another period. |
| Decreasing face amount | The premium stays the same but the death benefit shrinks every year. |
| Expiry | Coverage ends. |
Real policies show the range. State Farm says its Select Term policies can stay in force after the initial term "at an increased cost up to age 95" (source; see State Farm). Banner Life's 2026 product specifications for its OPTerm policies say that after the initial level period "the coverage amount will be reduced and the premiums may increase," with coverage ending at age 95 (Banner Life). The NAIC Life Insurance Buyer's Guide sums up the general rule: most term coverage can be renewed even if your health has changed, but the new premiums are higher, and you should ask what they'll be before you renew.
How big the price jump can be
The SOA study, which drew on data from 25 companies, found that in the jump-to-renewable design the first premium after the level period can be as high as 10, 20 or even 30 times the level premium. Depending on the size of the increase, between 27% and 96% of those policyholders dropped their coverage at that point.
The people who keep paying are, on average, the ones who couldn't get coverage elsewhere. The study found their death rates in the first year after the level period ranged from about 1.5 times to more than 10 times the rates seen during the level term. Insurers know this and price renewal rates for a pool that's sicker than average, which is why renewing is rarely a bargain for a healthy person.
One practical warning: the study found policyholders paying by automatic bank draft were less likely to drop coverage than those who received a bill. If your premium is drafted automatically, a large increase could start coming out of your account before you've decided whether you want it. Watch your statements around the policy anniversary.
Your options
- Let it lapse. If your children are grown, the mortgage is paid and your spouse would be secure on savings and retirement income, ending the coverage is the expected outcome. You simply stop paying. There's no cash value to collect and no tax consequence. Policies with a return-of-premium feature are the exception; they refund premiums if you outlive the term (see return of premium term life insurance: is it worth it).
- Keep it at the renewal rate. Because most policies are guaranteed renewable, you can continue without a medical exam. This can make sense for a year or two as a bridge, or indefinitely if your health has declined and no other insurer would cover you at a lower price. Compare the guaranteed schedule, not just next year's rate. See renewing term life insurance after the level period ends and Annual renewable term (ART) life insurance.
- Convert to permanent coverage. If your policy's conversion privilege is still open, you can switch to whole life or universal life without proving good health. The new premium is based on your current age and is much higher than term, but the coverage can last for life. Deadlines vary and often arrive before the term ends: Banner's OPTerm specifications, for example, allow conversion during the level premium period or until age 70, whichever comes first. Details are in converting term life to permanent: how the conversion option works.
- Buy a new policy. If you're healthy and still need coverage, a new term policy priced at your current age is usually far cheaper than the old policy's renewal rate. It requires full underwriting, and options narrow with age; see term life insurance at 60 and beyond. Don't cancel the old policy until the new one is issued and in force.
- Buy less. Your need is probably smaller than when you bought the original policy. A smaller new policy, a shorter term, or a reduced face amount on the old policy (if the insurer allows it) can cover what's left, such as final expenses or a few remaining years of a mortgage.
A timeline for deciding
Two to three years before the level period ends
- Re-run your coverage needs with the How much life insurance do I need?: debts, dependents, savings and your spouse's retirement income.
- Find your conversion deadline. It may be well before the term ends.
- If you still need coverage, use the How long a term do I need? to decide how long, and get quotes while you're still in the age bracket you're in now.
About a year before
- If you're healthy, apply for any new coverage you need now. Underwriting can take weeks, and a new diagnosis between now and the end of the term could change everything.
- Ask your insurer for the guaranteed renewal premiums in writing.
In the last 90 days
- Make a final decision on renewal, conversion or replacement.
- If you're letting the policy go, stop the automatic payment so you don't keep paying the higher rate by default.
- Keep the old policy in force until any replacement is issued.
A worked example
This is a hypothetical illustration. Say Dana bought a $500,000, 20-year policy at 42 for $40 a month. At 61 she gets a notice: the level period ends next year, and the first renewal premium is $400 a month, rising every year after that.
- If Dana is healthy and still has five years of mortgage left, she applies for a new 10-year term for a smaller amount, which at her age and health will likely cost a fraction of the renewal premium, and lets the old policy lapse once the new one is in force.
- If Dana was diagnosed with heart disease last year, a new policy may be expensive or unavailable. She compares renewing for a few years with converting part of the coverage to permanent insurance before her conversion window closes.
- If Dana's mortgage is paid and her husband's pension and savings would cover him, she lets the policy expire. The $9,600 she paid over 20 years bought two decades of protection.
Key takeaways
- At the end of the level period, coverage may end, continue at a much higher annually increasing premium, or continue with a shrinking death benefit; your contract says which.
- Renewal premiums can start at many times the level premium, and they're priced for a pool of less healthy policyholders.
- Your main options are to let it lapse, renew, convert before the deadline, or buy a new and usually smaller policy.
- Start two to three years early: check your conversion deadline, re-run your needs and apply for new coverage while you're healthy.
- If you pay by automatic draft, stop or adjust it so you don't pay a higher renewal rate by default.