In the UK, 35% of the population have a life insurance policy.[i] Life insurance covers your loved ones when you pass away, providing enough financial security to help them continue their lives without the worry of loans, debts and hefty payments.
Term life insurance is one cover option. It locks your monthly rate for a level term period that can range anywhere from 5, 10, 15, 20 to 30 years, paying out if the insured person passes during that term. Reaching the end of a term life insurance may be worth celebrating, but dental professionals in that circumstance may find themselves wondering about their options going forwards – should you renew or not?
Times change
A lot can change in a few years. The term life insurance policy you took out 10 years ago might not match the extra needs you have today. In the elapsed time you may have married, had children, undergone an expensive medical operation, supported older children with tuition fees, or taken on the responsibility of looking after your parents or vulnerable family members.
Conversely, your position at the end of a term life insurance policy may mean you do not need as much financial support in the wake of your passing: your children may be self-sufficient adults no longer dependent on financial support, you may have paid off your mortgage, or you may have more savings or assets to fall back on that offset the need for a large life insurance pay-out. Assessing your economic position at the end of a term life insurance policy is essential for you to make the next choice that is most appropriate for you.
There are several options awaiting those whose term life insurance is or will soon expire:
- Renew / extend the policy
- Purchase a new term life policy
- Switch to permanent life insurance
Renew dawn, renew day
For those with dependents, outstanding payments, or a serious health condition, renewing your life insurance protects your family financially. Many term policies can be renewed with a year-by-year extension that works on a higher premium; age and life insurance increase together, with premiums jumping over 35% between the age of 30 and 40.[ii] As each year passes, every renewal therefore has the potential for greater premiums. Renewing is the only way to continue your life insurance due to a change in health, as a terminal illness can limit a new policy that offers a large pay-out.
Pay for policy
Rather than renewing, purchasing a new term life policy can be worthwhile to reduce the higher premiums that renewing involves. However, because a substantial amount of time would have passed since the now-expiring term life insurance was taken out, there may be complications with a new policy because of your current circumstances. A medical exam may also be required to determine your health – this can impact the premiums you pay.
Switch it up
Some current term life policies may have a rider that allows the conversion to a permanent life insurance. This could be a whole life or a universal life insurance. As it is impossible to outlive permanent life insurances, they are far more expensive than term life insurances as there will be a guaranteed pay-out. However, the accumulation in cash value can make them a more suitable insurance policy for those who have numerous dependents or financial commitments. Moreover, a medical exam or proof of insurability is not required when converting to whole life cover, making it a reliable option for those with a chronic illness.
Switching from term to permanent cover may only be available at certain points in the policy, so you must plan the conversion in advance of the insurance expiring.
Safe support
Weighing up the options for continuing your life insurance cover can be difficult without an Independent Financial Adviser (IFA). money4dentists has been working for years to support dentists in making the best financial decisions for them. The team of IFAs at money4dentists can develop practical and effective strategies to secure your future. From defining your goals to evaluating your financial situation, you will find that the money4dentists team are dedicated to fulfilling the financial wishes of you and your loved ones.
Being able to look after your loved ones and protect them when you have passed away is possible with the appropriate life insurance cover. By assessing your financial situation at the end of a term policy, you can determine what the next step to cover you and your family will be.
For more information, please call 0845 345 5060 or 0754DENTIST.
Email info@money4dentists.com or visit www.money4dentists.com
Author: Richard T Lishman, Managing Director of the 4dentists Group of companies
[i] Pratt, K. (2023). 2023 UK Life Insurance Statistics. [online] Forbes Advisor UK. Available at: https://www.forbes.com/uk/advisor/life-insurance/life-insurance-statistics/.
[ii] Cahill, E. (2022). Can I Renew My Term Life Insurance Policy? [online] Experian.com. Available at: https://www.experian.com/blogs/ask-experian/should-i-renew-term-life-insurance-policy/#:~:text=If%20you%20opt%20to%20renew [Accessed 14 Aug. 2024].
