What Is Extended Term Insurance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 September 2019
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Extended term insurance is a provision that is sometimes included in the terms of conditions of an insurance policy. With the inclusion of the provision, the insurance coverage can continue to exist for an additional period of time. Typically, the ability to exercise this option has to do with the cash value of the policy. This type of option can be found in a number of whole life insurance plans, making it possible to enjoy additional security for a longer period of time.

The function of extended term insurance is to allow the covered party an opportunity to continue enjoying the coverage provided by life insurance, even if he or she is no longer able to afford the premiums on the policy. In most applications, this is managed by converting the whole life insurance plan into a term life insurance plan. As part of the process, the cash value that has accumulated over the years with the whole life policy is then used by the insurance provider to fund the payment of premiums on the term life plan. The benefit to the insured party is that there is still life insurance in place, with the same beneficiaries and a range of benefits that are close and possibly equal to the terms of the payout provided to those beneficiaries.


The inclusion of an extended term insurance option in a whole life policy helps to make the coverage more attractive to consumers. By providing some sort of option that can ensure continuance of the coverage even if the insured party is ill for an extended period of time and unable to make premium payments, the insurance provider helps the client to avoid worries of what would happen to loved ones if he or she passed away. Owning to the coverage provided by the converted insurance plan, there will still be some type of disbursement to the designated beneficiaries, provided that the term life insurance is current at the time the insured party passes away.

An important benefit of extended term insurance is that when and if the insured party recovers at some point and is able to resume making payments on the insurance plan, there may be the possibility of rolling the term plan back into a whole life plan. This is particularly true if the cash value associated with the original plan has not been exhausted due to covering the premiums on the extended term insurance. The policyholder also has the option of leaving the term plan in place and choosing to submit payments according to the payment schedule outlined in the policy’s provisions, rather than attempting to move back to a whole life policy.


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