When Your Term Life Insurance Ends, These Are Your Best Options

The simplest form of life insurance, term life insurance, is usually bought by people who just want to ensure death benefits. It can be one of the cheapest options, with its premiums based on the age and health of the insured person. But what happens to term life insurance at the end of the term?

Unlike whole life insurance, term life insurance is for a specified period, such as five, 10, 20, or 30 years. At the end of the term, the life policy expires, and you won’t receive a refund for your premiums unless you've opted for a return of premium life insurance.

If you still need life insurance at the end of the term, you can get the policy renewed or go for a new policy. To renew an old policy, you'll likely pay more than you first did because you've aged since you started the policy and might not be in the same health situation.

When choosing a term life insurance policy, it's better to go with those that are reputable, have strong financial ratings, and have stood the test of time. Investopedia has ranked the following as some of the best:

• Best overall: Haven Life Insurance.
• Best for return of premiums: State Farm.
• Best for decreasing term: Protective Life Insurance.
• Best for company longevity: New York Life.
• Best for customer satisfaction: Northwestern Mutual.
• Best one-stop shop for insurance: Guardian Life.

Term life insurance policies don't typically offer cash-value benefits. Permanent or whole life insurance policies, on the other hand, offer both death benefits and cash value.

"Cashing out" means accessing the accumulated cash value of the policy before the death of the policyholder. Since term life insurance policies don't have a cash-value component, it's not possible to cash them out. However, some give policyholders the option to convert term life into permanent life insurance for an added cost.

According to U.S. radio host, financial expert, and national bestselling author Dave Ramsey, if you depend on your income right now, you need term life insurance. The generally recommended amount is equal to 10–12 times your annual income on a 15- or 20-year guaranteed level term plan. He recommends going for “A” rated companies.

Moreover, between term and whole life insurance, he believes the former offers much better value for your money. Whereas whole or universal life insurance policies let you invest part of the money paid, their premiums are much higher. Also, their returns are lower than for other investments such as IRAs.