Term Insurance: What Happens If You Outlive It?

At Havend, we strongly advocate using low-cost term insurance to cover your income protection needs during your earning years. Term insurance provides life insurance coverage (death benefit) ensuring your dependents are well provided for until they become financially independent, or you reach retirement age. For protection against critical illness or occupational disability, the coverage should last until retirement.

So, what happens if you outlive your term insurance policy? Firstly, congratulations! You have made it this far without having to claim on your insurance. During the term of your policy, you should have been saving and investing towards your retirement. By this stage, you should have accumulated sufficient funds to enjoy your retirement without the need for income protection, having achieved financial independence.

 

At Retirement, You Will Still Need:

A Fully Paid-off Home: This ensures that your retirement income is free for spending, not tied to mortgage payments, keeping you debt-free.
Medical Insurance and Long-Term Care Insurance: To cover medical expenses and long-term care costs.
A Stable Stream of Retirement Income: Ensuring financial security during your retirement years.

 

Case Study: John’s Scenario

John purchased a 35-year level term insurance policy at age 30, covering $1 million for death/total permanent disability (TPD) and $500,000 for critical illness protection. This coverage was crucial to ensure his family’s financial security and income replacement during his working years.

Now at 65, John’s term insurance has expired, and he has accumulated $1.5 million through savings, investments, and CPF monies.

We hope John enjoys a long and healthy life after 65. However, let’s explore three possible scenarios he may face:

Scenario 1: Death at 65

If John dies at 65, his wife will inherit his $1.5 million estate. While she will miss John’s presence, she will not have to worry about her financial future, as she will benefit from the entire estate.

Scenario 2: Major Critical Illness at 65

If John suffers from stage 4 cancer at 65, his critical illness term insurance has expired, but he will have medical insurance to cover treatment costs, including chemotherapy and outpatient cancer drug treatment under the Cancer Drug List (CDL). Financial independence means he no longer needs critical illness protection for income.

Scenario 3: Severe Disability at 65

If John becomes severely disabled at 65 and cannot perform 3 out of 6 activities of daily living, his long-term care plan will provide a monthly disability benefit to cover caregiving needs, rehabilitation, nursing home costs, medication, and more.

 

Conclusion

You should not need permanent life insurance if you have these essentials in place. Ensuring that your coverage duration meets your protection needs is crucial. Proper planning and achieving financial independence mean that outliving your term insurance is not a problem but a milestone of successful financial management.

You can also watch a video on this topic here.

Learn more about a term life plan versus a whole life plan in this article that I wrote. I hope you will find this simple to understand and useful to apply it to your own unique situation. 

Do reach out to us for a complimentary InsureWell Assessment to find out if you are adequately covered with your existing insurance or overpaying for inadequate coverage. We promise to tell you if you have enough insurance and if that is the case, you need not purchase any insurance from us.

This is an original article written by David Law, Insurance Specialist at Havend.


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