Planning in year 15 of a 20-year term: your options map

A 20-year term policy feels like a finished decision for the first decade or more. The premium is level, the bill arrives, and nothing needs attention. Then year 15 arrives and a deadline you never thought about is five years away. By year 20 the premium either disappears with the coverage or jumps, and some of the best options, such as converting to permanent coverage, may expire before the term does.

This post lays out the choices for the last five years as a map with a clock. For each option it says when the clock starts and stops, what it costs in principle and what a change in health does to the choice. The people and numbers are hypothetical, and any rates are invented to show shape, not price.

Meet Elena, in year 15

Say Elena bought a $500,000 20-year level term policy at 35 for an illustrative $40 a month. It is now year 15, and she is 50. Her two children are 15 and 12. She earns $90,000, her spouse earns $40,000, and the mortgage has $140,000 left. She has $100,000 in savings she would spend, and her employer provides group life of one times salary, $90,000.

The first job is to ask whether she needs $500,000 of coverage at all, using a short needs calculation like the one in our guide to renewing term life insurance after the level period ends. Her version:

• Income to replace: say $40,000 a year for the 6 years until the younger child is 18, so $240,000
• Mortgage: $140,000
• Remaining education: $60,000
• Final expenses: $10,000
• Total: $240,000 + $140,000 + $60,000 + $10,000 = $450,000
• Minus savings $100,000 and work coverage $90,000: $450,000 - $190,000 = $260,000

Elena's need today is about $260,000, which is already below her $500,000 of coverage. Now look five years ahead, at the last year of the term. The children are 20 and 17, so one year of income remains ($40,000), the mortgage is $100,000, education is $30,000 and final expenses are $10,000, for $180,000. Savings have grown to $160,000, and work coverage is still $90,000, so the need is $180,000 - ($160,000 + $90,000) = -$70,000, which is negative: her resources already exceed it. For Elena, as her needs shrink, the question in year 20 is not "how do I keep my coverage" but "do I need any".

That is one possible outcome. The rest of this post covers the others, because many families look different: a mortgage that is longer, a child with a disability, a business debt, a spouse with no retirement savings, or a health diagnosis that makes replacement coverage hard to buy.

The five options

Each has a different clock and a different dependence on health. The sections below take them in turn.

Option 1: Let it end

If the calculation shows you no longer need coverage, the simplest decision is to do nothing and let the term expire. Our guide to what happens when your term life policy expires explains what happens on the last day.

The clock. The policy ends at the end of its level period. Check whether it renews automatically; many policies continue as annual renewable term unless you cancel, and a bill at the renewal rate may arrive. Decide before the date.

Health. Irrelevant, since you are not seeking new coverage. But health matters a little for a reason beyond the premium: if a lasting need could arise later, the cheapest time to arrange for it is before the term ends, while you can still convert.

Check before deciding. Whether anyone else relies on the coverage, such as a lender, an ex-spouse under a divorce decree or a business partner. These obligations do not end because the policy does.

Option 2: Renew annually

Most level term policies are guaranteed renewable, which means you can continue the coverage past the level period without a health review, as long as you pay. The premium then rises every year based on your attained age, according to a table in the contract.

The clock. Renewal begins automatically on the day after the level period ends. The schedule of maximum annual premiums is in your policy, and you can request it now.

Cost: an illustration. The 2021 Society of Actuaries study of post-level term experience found that first renewal premiums in the most common design were "as high as 10, 20 or even 30 times" the level premium. For Elena, say the first renewal year costs ten times her level premium, which is $480 x 10 = $4,800, and that each later year rises by 10 percent. These are invented numbers meant to show the shape, not a forecast.

The same study reported that those who kept paying died at far higher rates than expected, consistent with adverse selection: healthy people leave for cheaper coverage and the insurer prices for those who stay. The result is that renewal is a safety net, not a bargain. See renewing term life insurance after the level period ends for the source and details.

Health. Renewal is the option that does not care about health. For someone who has developed a condition and cannot buy a new policy, it is the guaranteed way to remain covered, and the high price is the cost of that guarantee.

A useful tactic. If the contract allows a reduction in face amount at renewal, reducing the death benefit to what you still need cuts the premium. Elena's need in year 15 was $260,000, about half of her $500,000. Some policies allow a reduction and some do not; ask.

Option 3: Convert

Many term policies include a conversion privilege: the right to exchange the term policy for a permanent one from the same insurer without new evidence of health. The new premium is based on your age at conversion, and the health class generally carries over from the original policy.

The clock. This is the one that surprises people. The conversion window is set by the contract. In some policies it lasts for the whole term; in many it ends years before the term does, or at a specific age. If your window closes at the end of year 10 or year 15, it may already be shut. Find the clause today. Our guide to converting term life to permanent: how the conversion option works explains what to look for, including whether a partial conversion is allowed.

Cost: an illustration. Say a whole life policy costs an invented $150 a month per $100,000 at age 52. A partial conversion of $100,000 would add $150 x 12 = $1,800 a year, and the rest of the term would carry on at its level premium until it ends. The point is that converted coverage is lasting but costs far more per dollar than term. People convert for a lifelong need, not for a temporary one.

Health. Conversion exists for the person whose health has changed. You do not have to qualify, so a new diagnosis does not block it. If you have had a diagnosis and still have a window, our post converting term after your health changes: a walkthrough walks through the choices.

Option 4: Buy new term

If you are still healthy, a new policy may cost far less than renewal. It is underwritten at your current age and health, so you need an application, and probably an exam.

The clock. Underwriting takes weeks, and a complicated file takes longer. Do not start in the last month. Starting in year 16 or 17 leaves room for a second attempt if the first offer is worse than expected.

Cost: an illustration. Say a healthy 55-year-old could buy a new 10-year, $500,000 term policy for an invented $100 a month. Over 5 years that is $100 x 12 x 5 = $6,000, against $29,304.48 for five years of Elena's invented renewal. Over 10 years, the new policy costs $12,000 and renewal totals $76,499.64. Remember that the numbers are invented and that real renewal tables are in the contract. The comparison method is what is worth keeping: request the guaranteed premiums for the next several renewal years, add them up, and put the sum beside a quote for a new policy of the length you need.

Health. This option is for healthy people. A condition developed since you bought the policy may mean a higher rate class or no offer at all.

Two cautions. A new policy starts a new contestability period, typically two years in most states, so an error on the application matters again; see replacing a policy resets the contestability clock: what to expect. And do not let the old policy end, or cancel it, until the new one is issued and in force; our post on replacing a term policy without leaving a coverage gap covers the sequence.

Option 5: Ladder or split

You do not have to choose one option for the whole amount. A family whose need is falling can combine pieces.

For Elena, if the situation were slightly different, say a younger spouse and a longer mortgage, she could:

1. Let $250,000 of coverage end at year 20.
2. Buy a new $250,000 10-year term policy at 55 to carry the remaining need.
3. Convert a small amount, such as $50,000, if a lasting need exists.

This is the structure described in laddering term life policies to match your needs, and the term life ladder builder tool on this site lets you test amounts and lengths. The drawback is complexity: two or three policies mean two or three sets of rules, and the original may or may not allow a partial reduction.

Questions to put to the insurer in year 15

A single phone call or secure message can settle most of the uncertainty. Ask for the answers in writing.

1. Until what date, or what age, can I convert, and does the window cover the whole amount or only part?
2. Which permanent products can I convert into, and is the premium based on my attained age or on my original age?
3. What are the guaranteed maximum premiums for each year after the level period, and does renewal begin automatically?
4. Can I reduce the face amount, and does that change the renewal premium?
5. Will the policy, including any riders, continue past the level period, or do the riders end?
6. Who is listed as the beneficiary, and when was the designation last confirmed?

These questions cost nothing, and the answers define the map. Without them, the five options are guesses; with them, each option has a date and a price.

A year-by-year clock

Use this as a working calendar. Dates are relative to the 20-year anniversary.

How health changes the map

Health since you bought the policy is the biggest branch point.

• Healthy, or better than at purchase. New term is most likely to be cheapest. A better health class than your original also helps; see term life insurance after 50.
• A new condition, stable and controlled. Ask for quotes and see how the insurer rates it, but have a fallback: convert or renew.
• A serious or recent diagnosis. The privileges in the old contract, conversion and guaranteed renewal, are the main protections. Use them rather than risk losing coverage by applying for a new policy and being declined.
• Uncertain. An informal inquiry, where an agent asks insurers about your case without a formal application, can show what is likely before you commit. Not every insurer offers it.

If you apply for a new policy and are declined, you still have the old policy and its rights, so long as you did not cancel it. That is why order matters.

Mistakes to avoid

• Missing the conversion deadline because you were looking at the end of the term and the window closed earlier.
• Assuming the premium stays level. After the level period, rates rise every year.
• Cancelling before the replacement is in force. A gap in coverage is a gap in protection.
• Applying with inaccurate answers to get a better rate. A claim dispute is more costly than any premium difference.
• Holding coverage out of habit. If the need has fallen, a policy you do not need is just a bill.

Key takeaways

• Year 15 is the time to start. Read the conversion clause and the renewal table now, and rerun your needs calculation.
• Five options exist: let it end, renew annually, convert, buy new term, or combine them in a ladder. Each has its own clock, and conversion windows often close before the term does.
• Renewal is a guarantee and a high price. New term is cheaper for the healthy but requires underwriting. Conversion needs no exam but costs the most per dollar.
• Health changes decide the branch. If health has worsened, rely on the rights in the contract. If it is good, compare the sum of renewal premiums against a new policy.
• Never cancel the old policy until the replacement is issued and in force.