How long does a 20-year life insurance policy last? My husband and I mistakenly thought that a 20-year term life insurance policy lasted for 20 years, unless of course one opted to extend it. We recently found that life insurance companies can keep collecting payments for as long as they’d like. And, our life insurance company was continuing to charge us well beyond the 20-year term.
Since we thought we knew when our 20-year policy would run out, to ensure we had coverage for a longer term, we took out new policies with the same insurance company several years before the old ones were to end. We’re both healthy at 60 and 58, with our home and kids’ educations paid for, so when we took out new policies, we switched up the terms and got good rates.
We had discussed our strategy with the company’s agents at least a couple of times over the years, so we assumed we understood what we were doing. But, recently, my husband discovered that we’d still been making automatic payments on the initial 20-year policies, which we thought had timed out. The rates had jumped! On mine, for example, the rate had gone from $32.37/month to $192.27/month. For the new policy, my premium is $108.73/month.
Of course, we should have been looking at what was going out on the automatic payments from our bank. In retrospect, it’s easier to notice automatic payments on credit cards, and we should not have signed onto automatic bank withdrawals.
Some of our friends were aware that life insurance policies didn’t just run out, but most were not. Our company’s web site and contract describe a “conversion option expiration date,” which happens at the 20-year point. Only now do I understand that this means that we lose the right to continue the insurance at the 20-year point, but the insurance company retains the right to extend the insurance without notification. We certainly would have never made a choice to continue a policy we didn’t need.
Insurance company agents never let us know that our initial policies were continuing when we spoke with them about buying our new policies. Once we learned we were paying for two policies and contacted the insurance company, the agent let us know that such misunderstanding happens a lot.
As usual, buyer beware.
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