Is Your Term Life Insurance Policy Expiring? 3 Paths to Consider Next
An expiring term life insurance policy is a great wake-up call to update your coverage and estate plan so they align with your current season of life.
A pattern shows up often enough in my practice that I've stopped being surprised by it.
Someone in their mid-50s comes in for a routine check-in. Their mortgage is paid off. The kids whose 20-year term life policy was meant to protect are mostly grown. That policy did its job well.
But somewhere in the conversation, it comes out that an aging parent has just moved in or started needing help that wasn't part of anyone's plan two decades ago, right around the time the original coverage is scheduled to end.
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September is Life Insurance Awareness Month, which makes this a good moment to look at a timing problem that comes up more than people expect. This isn't a rare coincidence.
According to Northwestern Mutual's Planning & Progress Study, roughly one in five Americans is caring for a family member, and many are making financial trade-offs to do it: Cutting spending, pulling from savings or taking on debt.
That's the backdrop many are managing when a term policy expires in the same decade.
What makes these situations challenging is not necessarily the policy itself. It is that people may be trying to address today's responsibilities with a financial plan built for a very different season of life.
How age and health affect the cost of new coverage
Here's what I explain to people in that situation: Term life insurance is generally relatively inexpensive because it's temporary, and the premium you paid years ago reflected your age and health at that time.
When that policy ends and you look for new coverage at 55 instead of 35, an insurer isn't underwriting the same person. Medical history and health markers may have changed over that period, even for people who feel healthy.
What that means in practice: Replacement coverage at this stage may cost more for the same death benefit, and health changes can sometimes limit what you're able to qualify for.
I don't tell people that buying term coverage in their 30s was a mistake. If they had a young family and a time-limited need, like a mortgage or a child's dependent years, term insurance was likely the most cost-effective way to secure meaningful coverage, and for many it still is. The issue is making sure the plan keeps pace as responsibilities change.
Three ways to approach an expiring policy
If your term policy is nearing its end date, there are three paths to consider. The right one depends on your health, budget and what you're trying to protect against.
Convert what you have. Some term policies include a conversion option that may allow you to convert some or all the coverage to a permanent policy, subject to policy terms, without new medical underwriting.
This may be a valuable option for anyone whose health has changed, but conversion windows are typically limited to a specific age, so check before your policy expires.
Add smaller coverage on top. Instead of replacing your full death benefit, you may need only a death benefit to help cover a narrower, current gap, like a parent's care needs or a remaining few years of a child's dependency on your income.
Start over with today's numbers. The coverage amount that made sense at 35, based on income replacement, a mortgage and young children, may have little to do with what you need to protect now. Recalculating based on your current obligations often produces a more accurate target.
This kind of planning matters even more for those also thinking about what they'll eventually leave behind. A historic $124 trillion intergenerational Great Wealth Transfer is already underway between generations in the U.S., and those revisiting an expiring term policy are often also due for a broader look at their estate plan.
Don't skip the estate planning conversation
An expiring policy is a natural prompt to check something many haven't looked at in years: Their beneficiary designations.
I ask clients to review whether their beneficiary designations still align with their estate plan and whether they should consult tax or legal professionals about potential unintended consequences.
A former spouse listed as beneficiary, a minor child who'd receive a lump sum before they're ready to manage it or an estate named as beneficiary by default can all create complications that a trust, staggered distribution or other planning tool may help address.
Some permanent life insurance policies can build cash value over time. For some households, its death benefit can help address estate planning needs, which may include estate taxes, equalizing inheritances among heirs or charitable giving.
For those whose estate plan hasn't been reviewed since the term policy was purchased, an expiring policy is as good a reason as any to have both conversations at once.
For wealthier individuals, the expiring policy itself is often less the point than what it was quietly standing in for. Coverage tied to a business loan, buy-sell agreement or key-person planning can also expire or lapse, and often carries higher stakes.
It's also common for these clients to have postponed other estate planning decisions, such as gifting assets into a trust or updating succession plans. An expiring policy is a reasonable prompt to finally have that conversation.
What to do before the policy lapses
If any part of this sounds like your household, a few steps are worth taking now, while you still have options:
Pull your policy documents and check whether it includes a conversion option and by what date it needs to be exercised
Take an honest inventory of who currently depends on your income, rather than the picture from 20 years ago
Check your beneficiary designations against your current estate plan, not the one you had 20 years ago
Talk to a financial adviser before your term expires, not after a lapse notice arrives — options narrow once the policy has ended
In my experience, the clients most exposed to this timing mismatch usually aren't the ones who think of themselves as underinsured. They may have purchased exactly the right coverage for the season of life they were in.
The challenge is that life rarely stands still. Careers change. Families change. Businesses grow. Parents age. Responsibilities shift.
The good news is that many of these situations can be addressed when they are identified early. The goal is not to perfectly predict every change life may bring. It's to revisit your plan often enough that it can evolve alongside the people and priorities that matter most.
Sometimes an expiring policy is simply the reminder that it's time to make sure your financial plan has changed along with your life.
Article prepared by Northwestern Mutual with the cooperation of Gina Cimineri. To view detailed disclosures regarding individual representatives, view their information at taketwofinancial.nm.com.
This article is not intended as legal or tax advice. Financial Representatives do not render tax advice. Consult with a tax or legal professional for advice specific to your situation.
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