Convertible term life insurance is a type of life insurance that allows the policy owner to change a term policy into a whole or universal policy without going through the health qualification process again.
Most term life policies are "level term life insurance," which means the premium (and death benefit) stay the same for the length of the term, which could be 10, 20, or 30 years.
A convertible level term policy works precisely the same way – but it has a provision or "rider" that gives you the option to convert to a permanent life policy later on.
If you don't exercise the conversion option, the policy will continue to protect you until the end of the term with no change. Many people that have a conversion clause in their policies probably don't even know it.
Why you should convert your term life insurance policy
There are a few reasons why you might want to switch your term life insurance policy to permanent life insurance. If you have had your term policy for a while and it is about to expire, you may want to switch so that you can keep being covered.
Additionally, if your health has changed since you first got the policy or if you can now afford a more expensive policy, it might make sense to switch to permanent life insurance.
Reasons to consider getting a convertible term life insurance policy
You're concerned that you could develop health problems
While term life insurance provides you with valuable protection for your family, changes in health throughout the years can make it difficult to find coverage later down the line. For instance, getting diagnosed with a chronic condition such as diabetes could cause premiums to skyrocket if you need more life insurance after that point. In extreme cases of medical deterioration conversion might be your only option to continue protecting those who depend on you financially.
You're not sure how long you need protection
Ensuring your family's security is one of the most important decisions you'll make. A term life policy can provide them with protection, but it pays to be prepared for any unforeseen events that might arise in the future. Investing in a convertible term life insurance policy allows you to adjust your coverage when needed - giving all those who depend on you complete peace of mind.
You're concerned about the cost to renew term life
As life insurance can become pricier as you get older, a 10-year term policy with convertibility may be an option worth considering. It provides the flexibility to extend your coverage when needed after those initial ten years are up - so that if costs start rising in future, your protection won’t have too.
You don't like the idea of paying premiums with no payout
Term life insurance policies typically expire without providing any return, as most people outlive the length of their policy. That's a positive outcome! However, if you want to build value beyond your regular premium payments made over several years, one solution is converting your plan into permanent life insurance - an easy and cost-effective option that could be right for you.
Pros and Cons of a Convertible Term Life Insurance Policy
When comparing convertible and non-convertible term life insurance policies, the difference in cost is negligible. It begs to ask - why not opt for a convertible term life insurance policy when it may provide you with greater flexibility down the road?
You already have permanent life insurance
Permanent life insurance has long-term benefits that are attractive to many people. However, they may also seek additional coverage for a limited period of time such as while their children still live at home. In these cases, permanent protection is already in place and convertibility isn't necessary; instead, opting for term policies can provide the peace of mind you need during this stage in your family's life journey.
You know you only need coverage for a fixed amount of time
For those looking to safeguard against particular, short-term expenses such as a mortgage, life insurance can provide the necessary protection without needing to consider a convertibility clause.
You have more specialized financial needs
For those with significant financial assets, term life insurance is a great way to provide temporary protection for their young family. However, the standard policy conversions may not be sufficient and require more specialized policies that are tailored towards high-net-worth individuals in order to ensure successful asset transfers amongst heirs down the line. If uncertain on what path makes most sense for you and your family's future plans, consult a knowledgeable financial or tax professional who can guide this essential decision making process.
convertible term life insurance
If you want to convert your term life insurance policy to permanent life insurance, there are a few things you need to do. First, find out if your life insurance company offers this option. If they do, they will likely require you to take a medical exam in a clinic before they approve the conversion.
Once you have been approved, you will need to pay any additional premiums that are required. These premiums will be based on your age, health, and the death benefit you have selected.