An annual checkup for the term policy you forgot about

Most term policies are bought in a burst of effort and then ignored for years. That is mostly fine, because a level premium that is paid automatically does its job quietly. The trouble is that everything around the policy keeps moving: your family changes, your bank card expires, your address changes, and the date when the cheap part of the policy ends gets closer without any notice. An hour once a year, with the checklist below, keeps a forgotten policy useful instead of merely existing.

Pick a date that already means something, such as your birthday, the day you do your taxes or the policy anniversary, and put it on the calendar. The checkup has seven parts. Each one explains why it matters, what to look at and what to do when you find a problem.

Start by finding the paperwork

You cannot check what you cannot find. Gather three things: the policy contract (paper or a PDF), the most recent annual statement or billing notice, and a login for the insurer's website if one exists.

If the contract is missing, ask the insurer for a duplicate copy. It is usually free or low cost, and the request is routine. If you do not remember which company issued the policy, or a relative bought it for you years ago, the how to find a lost life insurance policy guide walks through the search, including the policy locator service run by state regulators' association.

While you have the contract open, write down five facts on one sheet of paper and keep it where your family can find it:

1. The insurer's legal name and the policy number.
2. The face amount (the death benefit).
3. The date the level-premium period ends.
4. The date the conversion right ends.
5. The name and phone number of the person who should file a claim if you die.

This sheet is the single most useful thing a surviving spouse can have. People regularly learn that a policy existed only when they find a bank draft months after a funeral.

Part 1: Is the coverage amount still the right size?

A term policy is a fixed number. Your life is not. The question each year is whether the number still matches what your family would need if your income stopped.

Start with what has changed since the policy was issued:

• Debts. A mortgage that has been paid down for years needs less coverage behind it. A new car loan, a home equity line or a co-signed student loan adds exposure.
• Dependents. A new child raises the need. A child who has finished school lowers it.
• Income. A raise or a second income changes how much a surviving family would need to replace. So does a spouse who has gone back to work or left a job.
• Savings. Retirement and college accounts that have grown reduce how much insurance has to do.

A worked example, clearly hypothetical: say Priya bought a $500,000, 20-year level-term policy at 34, when her family had a $300,000 mortgage and a newborn. At 41, the mortgage balance is around $230,000, a second child has arrived, and her household savings have grown by about $120,000. If the family's rough need is "ten years of the lower-earning spouse's income plus the mortgage plus college funding," the answer might still be near $500,000, but the pieces are different. The mortgage is smaller and the child costs are larger and later. The checkup is the moment to redo the sum, not to assume the old answer still holds.

Run the numbers again with the How much life insurance do I need?. If you come out higher than the policy, you have a gap. If you come out lower, you may keep the policy as is, because dropping a cheap level policy to save a small amount is rarely a good trade. Look at your result as a range, not a point, and be honest about whether a gap is big enough to act on.

What to do about a gap

A gap does not mean you must replace the policy. A second, smaller term policy bought today covers the difference, and the old policy keeps its original price and its original health rating. Layering a new policy on top of an old one is often cheaper than replacing the old one with a bigger one, because the old policy was priced when you were younger. The laddering term life policies to match your needs guide explains how layers fit together.

Part 2: Are the beneficiaries correct?

This is the part of the checkup where mistakes cost the most. The insurer pays the person named on its records, not the person you meant, not the person your will names and not the person your family assumes.

Log in or request a written statement of the current beneficiaries. Then check each of these:

• Is every name still right? A divorce, a remarriage, a death or an estrangement can leave a name on the form that you would not choose today. Many states have laws that cancel an ex-spouse's designation after divorce, but those laws differ and do not always apply to every kind of policy, so do not rely on them. The divorce and your ex as beneficiary: revocation-on-divorce laws guide covers the problem.
• Is there a contingent beneficiary? If the first person you named dies before you, the contingent beneficiary receives the money. With no contingent and no living primary, the proceeds usually fall to your estate, which means delay and possibly probate.
• Are the shares written clearly? "My children" is vague. Names, relationships and percentages are better. Check that the percentages total 100.
• Is any beneficiary a minor? An insurer generally will not hand a large sum to a child. A court may have to appoint a guardian for the money, which is slow and public. Read naming a minor child as life insurance beneficiary for the alternatives, such as a trust or a custodian arrangement set up in advance.
• Are addresses and identifying details current? A beneficiary the insurer cannot find can wait a long time.

If anything is wrong, the fix is a change-of-beneficiary form from the insurer, signed by the owner. Steps and traps are in how to change your life insurance beneficiary. A will does not change a beneficiary designation. Keep the confirmation the insurer sends back, and file it with the policy.

Part 3: Is the payment method going to keep working?

Policies rarely lapse because someone decided to drop them. They lapse because a card expired, a bank account closed, an email address changed or a statement was thrown away as junk mail.

Look at three things:

1. How is the premium paid? Automatic bank draft, card, payroll deduction or a check you write each time?
2. Does that source still exist and have the same details? Cards expire and banks merge. A new card number after a fraud alert does not carry over to a recurring bill that was set up the old way.
3. Where do the notices go? The insurer's reminders and past-due letters go to the mailing address and email on file. If you have moved, they may go nowhere.

If the premium is billed monthly, ask what the annual total would be. Insurers often add a small fee or loading for modal payments, which is the practical cost of paying monthly. Ask the insurer for the annual figure. Paying annually, if you can, also means one payment to track instead of twelve.

Know your safety nets before you need them

Every policy has a grace period, commonly about 30 or 31 days, during which a missed premium does not end the coverage. Look up the grace period in your contract so you know it. If the premium stays unpaid past the grace period, the policy lapses and the coverage ends. Many insurers allow reinstatement within a window, but you generally need to pay the missed premiums and may need to prove you are still insurable. The reinstating a lapsed life insurance policy guide covers it. Reinstatement is a rescue, not a plan.

Some contracts also let you name a third party to receive lapse notices, such as an adult child or a trusted friend. If your insurer offers it, it is a cheap way to protect an older policyholder.

Part 4: Are your contact details current?

This part takes five minutes and is skipped more often than any other. Check that the insurer has:

• Your current mailing address and phone number.
• An email address you actually read.
• If you have a servicing agent, a way to reach that person. Agents retire and change firms, and sometimes a policy ends up without an assigned agent. Calling the insurer's customer service line reaches someone regardless.

Check that your family has the other half of the information: the insurer's name, the policy number and where the paperwork is. A policy that your family does not know about is a policy that may never be claimed. Unclaimed benefits eventually pass to state unclaimed property programs, and recovering them is slower than a normal claim.

If you are the policy owner and the insured is someone else, such as a spouse, the same logic applies in reverse. Make sure the insured person and the beneficiary know what exists.

Part 5: When does the cheap part end, and what happens next?

A 20-year term policy has a fixed premium for 20 years. After that, a typical policy continues only on a year-to-year basis at a much higher price, or ends. Put the end date of the level period on your calendar now, even if it is a decade away.

Two dates matter, and they are not always the same:

The conversion window is often shorter than the term. A policy might allow conversion only during the first 10 or 15 years of a 20-year term, or only until a certain age. This is a contract term, not a standard, so read yours. The conversion privilege is valuable if your health declines, because it lets you move to a lifetime policy at your original health rating. It is worthless if you let the date pass without noticing.

Say a policy was bought 12 years ago and the conversion window runs through year 15. At this year's checkup, the owner sees there are three years left. That is the right time to ask three questions of the insurer: which permanent policies may I convert to, what would the premium be at my current age for a partial conversion, and is the deadline the date I think it is. Write the answers down. If the answer to "do I want a permanent policy?" is clearly no, note the date on the calendar as the day the option is gone, and move on.

For more on how conversion works and what it costs, see converting term life to permanent: how the conversion option works.

Part 6: Has your health changed since you bought it?

You do not need to tell the insurer when your health changes. A level term policy stays in force and the price does not change because you developed a condition. That is one of its strengths. But you should know where you stand, because the answer changes what you do next.

• If your health is the same or better, you could probably still buy new coverage at a fair price today. A new policy is a real option for closing a gap or extending coverage past the old end date.
• If your health has worsened, the old policy has become much more valuable. Its price was set when you were healthier. Keep it, keep it paid, and treat the conversion window as an asset.
• If you quit smoking, you may qualify for a lower rate class on a new policy after a period without tobacco, and some insurers will reconsider an existing policy.

Do not cancel an older policy before a new one is approved, issued and in force, and do not assume a new policy replaces the old one's incontestability protection. A new policy starts its own contestability period. The replacing a life insurance policy: when it makes sense guide covers the traps.

Part 7: Decide whether to keep, convert, add to or let it go

With the other six parts done, the decision usually makes itself. Use this short list:

1. Keep as is if the amount still fits, the beneficiaries are right, the payment is secure and the end date is far enough away. This is the most common result and a good one.
2. Keep and add a layer if the need has grown. Buy a second, smaller term policy for the gap.
3. Keep and shorten the commitment if the need is falling. For example, you might reduce the face amount if the insurer allows it, but check whether the premium actually drops by enough to matter before you do.
4. Convert part or all if you have a lasting need, such as a dependent with a disability or an estate that must pay a tax bill, and the conversion window is closing. Get a written illustration first.
5. Replace only if you are healthy, a new policy is clearly cheaper or better on the same terms, and you have confirmed the new policy is in force before ending the old one.
6. Let it end if no one depends on your income any more and your debts are covered. It is fine for a term policy to expire when its job is done. That is what it was for.

A fee-only financial planner can help if the decision involves taxes, an estate or a business. For problems with an insurer, the state insurance department takes complaints and can often help find a missing policy or resolve a billing dispute.

A one-page version to print

Copy this list and fill it in each year.

• Policy found, contract copy on file: yes / no
• Insurer, policy number, face amount: ______
• Level period ends: ______ Conversion window ends: ______
• Coverage need re-estimated this year: ______ Gap or surplus: ______
• Beneficiaries confirmed in writing: ______ Contingent named: yes / no
• Any minor beneficiaries and a plan for them: yes / no
• Payment method works through next year: yes / no
• Grace period length from the contract: ______
• Address, phone and email on file correct: yes / no
• Family knows where the paperwork is: yes / no
• Decision this year: keep / add / convert / replace / let end

The annual life insurance policy review checklist tool offers a longer version.

Key takeaways

• A forgotten term policy needs one hour a year: check the amount, the beneficiaries, the payment method, the contact details, the key dates and your health.
• Beneficiary records at the insurer control who gets paid, so confirm them in writing and name a contingent beneficiary.
• Policies mostly lapse by accident, through an expired card or a missed notice, so know your grace period and keep the address current.
• The conversion window can close years before the term ends, so write both dates down.
• Often the best result of the checkup is "no change", and when the need has grown, a second smaller policy is usually the cleanest fix.