Converting Term Life to Whole Life Insurance
Convertible term life insurance allows you to convert a temporary (term) policy into a permanent policy, such as Whole Life Insurance.
People typically buy term life insurance because it's affordable, practical, and easy. You simply buy term life insurance for one low price for a specified length of time, also called a term. But what if your needs change, your term policy is set to expire, or you decide you want permanent insurance?
Fortunately, term life insurance provides for the best of all worlds. You can buy term life insurance now and then convert it to permanent insurance later.
Sometimes called going from "term to perm," converting your term life insurance to a type of permanent insurance is easy. It doesn't typically require a medical exam and term life insurance offers the conversion option, even if your health has declined.
Term life insurance policies provide coverage during the years you need it most, typically between 10 to 30 years.
Once you reach the end of your "term," your policy expires and you typically have three options: renew your policy, convert your term life insurance policy into a permanent policy, or discontinue coverage.
How Do Term Life Insurance Policy Conversions Work?
Many term life insurance policies have a clause written into the fine print that allows you to convert your term life policy into a permanent one.* You don't have to take advantage of it, but during a certain window of time, you have the option to convert to a permanent policy without a new medical exam or health questionnaire.
Consider a scenario. If you were to wait until your current term policy expires before applying for a new permanent policy, you would be asked to qualify for your insurance. With age and health as major factors, it's possible that you could face significantly higher rates. Converting early to a permanent policy can help you stem substantial increases in the prices you may pay to continue your insurance.
*Please see your policy for specific details
Reasons to Convert Your Term Life Insurance Policy to a Permanent One
You don't have to re-take a life insurance medical exam.
Life insurance medical exams are a prerequisite for many types of life insurance, including term life insurance and some permanent life insurance. Convertible term life insurance allows you to transition from a term life policy to a permanent policy, without re-taking a medical exam. That's ideal for those who may have experienced health changes or don't have the time to schedule an exam.
Permanent Life Insurance designed to meet your needs today — and tomorrow.
Maybe you've just had a baby or your family is still growing. You need a budget-friendly option for coverage — and term life insurance fits the bill. Once your children are financially independent or your paycheck increases over time, you may reevaluate your life insurance needs and discover that a whole life policy, rather than a term life policy, better suits you — and is now within reach.
You Need Lifelong Life Insurance Coverage to Protect Someone You Love
Converting to a permanent policy may be wise if you have a lifelong dependent. Whether you have a child born with special needs or a loved one who has developed a long term disability, you likely want to provide financial support to these people not just during your lifetime, but for their lifetime as well. A permanent policy has no expiration date, so you can rest assured knowing that at whatever age you pass away, your loved ones are prepared with the help they need to maintain quality of life.
You want life insurance with flexibility.
Permanent life insurance policies offer greater flexibility in comparison to a term policy. Since with permanent life insurance you carry cash value on your policy, the amount you pay in premiums month-to-month can increase, decrease or even be skipped at your discretion depending on a number of factors. While there are stipulations to these types of changes, in many situations, your policy will stay in effect as long as you maintain a positive cash value. This type of flexibility may become increasingly important as your financial needs change later in life.
You have a financial nest egg for your family's future.
Unlike term life insurance, whole life insurance builds "cash value," which grows with each monthly payment. Left alone, that money can become like a nest egg for your family's future. It can be used toward anything you'd like, such as supporting a child or grandchild's future education or supplementing a retirement fund.
The Cost of Converting a Term Life Insurance Policy to a Permanent One
While there are many benefits to converting your term life insurance policy to a permanent one, it’s important to note that there will typically be a cost increase associated with the change. While your health won’t be a factor in the cost increase, since you’re locked in to your current underwriting class, your age might cause an increase in your premiums.
If you’re worried about the increased premiums, but interested in a permanent policy, you also may be able to convert only a portion of your term policy. For example, if you have a $500,000 term policy, you can choose to convert just $100,000 of it, giving you a permanent policy with a benefit amount of $100,000. Since your permanent policy will have a smaller benefit amount, your premiums will be lower than if you converted the entire $500,000. In short, converting only part of your policy gives you flexibility; by converting a smaller portion of your term policy, you gain all the benefits of converting to a permanent policy while also mitigating costs.
By converting your term life policy into a whole life policy, you'll have a lifetime of coverage that can help to financially protect your loved ones. And you'll also be able to watch your policy grow in cash value — making your family's financial future even brighter.