How to Convert Your Term Life Insurance Policy for Permanent Coverage

Shawn Plummer

CEO, The Annuity Expert

If you have a term life insurance policy, you may be wondering if it’s possible to convert it into a permanent coverage policy. Yes, it is possible to convert your term life insurance policy for permanent coverage. In this guide, we will discuss the process of converting your term life insurance policy for permanent coverage and the benefits of doing so.

What Is Convertible Term Life Insurance?

Convertible term life insurance is a type of policy that provides temporary life insurance coverage. It is called “convertible” because the policyholder has the option to convert it into a permanent life insurance policy without having to undergo a medical exam. This can be an excellent option for people who want temporary life insurance coverage but are unsure if they will purchase a permanent policy. Convertible term life insurance is also a good option for people who want to save money on their premiums.

If you are interested in purchasing convertible term life insurance, compare policies from different insurers to find the best deal. You should also read the policy’s terms and conditions carefully to understand what you are buying.

Why Would You Convert Your Term Insurance?

A term life insurance policy may be all you need in the beginning. It’s a low-cost method to support your loved ones after you’re gone by providing death benefit protection that allows them to get through a difficult time and go on with their lives without financial stress when you’re gone.

However, as you get older, your requirements may change, and the coverage offered by a term life insurance policy may not be enough. For example, perhaps you continue to support dependents with your income or have incurred new debt and do not want it to go to your family if you pass away. This is where choosing a permanent life insurance policy over one-time coverage can ensure that the legacy you intend is maintained.

Fortunately, you won’t have to start from scratch with a new life insurance policy in many situations. Term conversion allows you to convert from term insurance to permanent coverage. Examine your policy for a conversion option if there is one available.

What Is A Term Life Insurance Conversion

It’s known as a term conversion, when you convert your term life insurance policy into a permanent one. Most convertible term life insurance policies allow you to convert some or all of your coverage into a permanent policy within a specific period.

What Is Permanent Life Insurance?

Permanent life insurance is a type of life insurance that does not have an expiration date. Unlike term life insurance, which protects you for a set number of years, permanent life insurance can continue to pay out benefits for the beneficiary’s lifetime, as long as premiums are paid according to the terms of the policy.

The ability to create cash value may be available through these policies. For example, permanent life insurance policies grow tax-deferred, so you don’t have to pay taxes on any gains if the policy is active. In addition, policyholders can withdraw cash value for various purposes, such as building retirement funds, increasing the death benefit, or using it to supplement pension income via a policy loan.

Permanent life insurance typically costs more in premiums, but it may offer the following benefits:

  • It doesn’t expire. You may keep it as long as you pay the premiums.
  • The opportunity to grow the cash value.

Types of permanent life insurance include:

Why Convert To Permanent Insurance?

There are several advantages to converting your term insurance policy into a permanent life insurance policy, which may encourage you to take action. Some of those benefits include:

  • No medical underwriting
  • The ability to upgrade coverage
  • Help pay for funeral expenses

No Medical Underwriting

The term conversion is typically much more simple than purchasing a new policy since most insurance companies allow you to convert without going through underwriting again.

When insurers evaluate your health history and background to set your premiums, underwriting is a procedure that helps them get a better picture of you.

Underwriting does not change, meaning that if you have developed health problems since acquiring your policy, your premiums will not be affected.

However, keep in mind that although changes in your health will not alter your premiums, they will still be influenced by your age.

Upgrade Your Coverage

If your income had improved beyond when you initially purchased life insurance, a permanent policy might allow you to upgrade your coverage at a higher premium.

Pay For Funeral Expenses

The costs of your funeral might be substantial. To assist your family pays for last-month expenses, consider converting to a permanent insurance policy to continue death benefit protection.

How To Covert Term Insurance To Permanent Life Insurance

It’s not difficult to convert your term life insurance into a permanent policy.

  1. Your first step should be to contact your life insurance agent. Your life insurance policy may be complex, so having them assist you in comprehending the details might make the conversion process simpler for you.
  2. Then, look for the option to convert your policy in the fine print.
  3. After choosing the options, figure out how long the conversion window will be. The period during which policyholders have the opportunity to convert varies. Some will allow it throughout a policy, while others will impose a maximum time.
  4. After you’ve done all of this, contact your insurance agent to discuss the conversion in further depth.

Ask Questions About Your Options

Some insurance carriers restrict the types of permanent policies you can convert your term policy into, so make sure you understand.

Find Out The Costs

The majority of term insurance plans can be converted for free, but this is dependent on the life insurance carrier. Depending on several factors, your premium may increase.

Converting In Stages

Although it is easy to convert your term policy at any time, you may not need to do so all at once. If that’s the case, you may be able to pay for it over a more extended period.

Find Out If A Conversion Makes Sense For You

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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