What happens to money at the end of life insurance term?

Question

As a young child and teen, I remember my mom saying on a few occasions that she bought term life insurance when I was a baby. It was a 30 year plan for 100,000. She said that the term would end when I turn 30 years old and if she doesn't die by the time it ends....then SHE would be able to collect on the plan (getting the 100k)

Now, I am 30 years old..and want to by term life insurance so my child will be taken care of incase I die. I'm thinking off getting a 20 year term.

MY QUESTION - is it so that in 20 years...if I don't die, then I will be able to collect all that money? I'm doing research on it and finding that with regular term life insurance, you don't get any money at the end of the term.....but I remember my mom saying different.

What do you know about it? (it isn't possible to ask my mom about it)

Answer 1

For TERM insurance, once the time period is up, you policy expires and you have no value (cash or otherwise ) left.



If you want something that creates a cash value and 'never' expires, you need PERMANENT insurance (whole life, universal life, variable univ life etc). But those types of policies are much more expensive.



You will need to weigh out the options and costs to determine which is best for you.

Answer 2

http://www.insureuonline.org/consumer_life_faqs.htm



If, I understand your question, your mother took out a policy for herself for $100,000 for a 30 year term. If, she had died anytime in those 30 years, then her policy would have paid a $100,000 death benefit to "her" beneficiary, which I am guessing would be you, to help support yourself after her death.



http://www.newyorklife.com/learn-and-plan/should-I-name-minors-as-policy-beneficiaries



Now, if she died and you was a minor, then it could get complicated on how/when you could receive the benefits.



But with term insurance, after the 30 years is over, then it is cancelled and there is NO money to collect, since no one died.



Only if she bought whole life or a universal policy, would she have any chance of collecting "any" money, but it is (never) the amount of the policy, only the cash value of the policy, which depends on the interest rate and other factors. (see 1st site attached)



Any policy only pays the full amount, (only) when you die and that is it and the policy is in force.



Hopefully other agents who know will be able to explain better than me. I understand insurance, but can't explain it where it might make sense.

Answer 3

With term life, there's no savings, and no collecting unless the insured person DIES. So, she's very confused.



It's probably whole life, because they don't write 30 year term for children. And when mom sees how little she gets back vs. how much she paid in . . .well, whole life is an "investment" for people who are bad at math.

Answer 4

Term life insurance does not work like that. It is literally insurance in case you die. If you don't die there is no money paid.



She thinks term acts like whole life insurance. It does not.

Answer 5

That is NOT how a term policy works. Either mom was wrong or you misunderstood her. There is no refund of premium under a straight term policy and you certainly don't get the death benefit paid to you at the end.

Answer 6

Your mother is completely wrong. Its just like car insurance, you pay the premium and if nothing happens, you part ways at the end of the term. You can renew or extend, essentially buying a different contract.

Answer 7

The money is gone forever. With term insurance, if no death occurs, then the money can never be collected. The money is used to pay benefits to the beneficiaries of the policy holders who do die. She is very, very wrong.

Answer 8

So- since you know the insurance policy doesn't work that way, what about making an investment that does give you a good rate of return? Are you interesting in that?