Converting Term To Whole Life Insurance, What You Need To Know

Shawn Plummer

CEO, The Annuity Expert

If you’re considering converting your term life insurance coverage to whole life, you’re likely wondering how it works and why it might be the right choice. Converting your term life insurance into a permanent, whole-life policy can offer a host of advantages, from increased death benefit protection to access to cash value over time.

And while there are certainly some potential downsides that come with this type of conversion—including higher premiums—it’s essential to weigh all the pros and cons before deciding if this is the best route for your situation. In this guide, we’ll look at everything from eligibility requirements and costs associated with the conversion process to available riders and more so that you can make an informed decision about whether or not converting your term policy into whole-life coverage is right for you.

What Is A Term Life Insurance Policy?

A term life insurance policy is a type of life insurance coverage that protects for a pre-determined period, usually between 10 and 30 years. If you pass away during the coverage period of your term life insurance policy, a death benefit is provided to your beneficiaries. Unlike permanent policies that cover you indefinitely and have cash value, term life plans are much more cost-effective with no accumulation in equity – making them ideal for short-term coverage needs at lower premiums.

Convertible term life insurance policies can be designed to fit your needs and budget – the policy will remain effective if you keep up with the premium payments. Many policies also offer riders that can be added to customize your coverage. Riders are additional benefits that protect specific situations such as accidental death or disability income.

What Is A Term Conversion On A Life Insurance Policy?

The term conversion is when you change your term life insurance policy into a permanent one. If you require more protection or seek long-term coverage, converting your term policy into a permanent one can be advantageous. In addition, many policies will let you modify some or all of it within a set time frame.

There are several types of permanent life insurance policies to choose from, and each one should be evaluated in terms of its benefits and cost before making a decision. Some of the most common options include whole life insurance, universal life insurance, and variable universal life insurance.

Whole life is the most basic type of permanent life insurance, and it has a fixed premium, death benefit, and cash value. This can provide financial protection for your family in the event of your death and can also be used as an investment tool to accumulate savings over time.

universal life insurance policy is more flexible than whole life and allows you to adjust the premium and death benefit according to your needs. The cash value of this type of policy can also be invested into different accounts, such as stocks or bonds, to help grow your savings.

Variable universal life is similar to universal life but with more investment options. It offers the ability to invest in various asset classes and provides the potential for long-term cash value growth.

What Is Term Conversion On Life Insurance?

Is Whole Life Considered A Permanent Life Insurance Policy?

Yes, whole life insurance is considered a permanent life insurance policy. This policy provides coverage life as long as premiums are paid. Whole policies accumulate cash value over time and have guaranteed death benefit amounts. They also offer the potential to access the accumulated cash value through borrowing or withdrawal options. As such, whole policies provide permanent protection and a helpful financial resource throughout your lifetime.

However, it is essential to note that the premiums on whole policies are typically more expensive than term life insurance policies. Additionally, depending on the policy and provider, there may be restrictions on borrowing or withdrawing from the accumulated cash value. And, if premiums are not paid as specified by the policy, coverage could be canceled, and you could lose any money placed into the policy.

Can I Convert My Term Life Insurance To Whole Life?

When the term period of your life insurance policy comes to an end, you may have the possibility to convert it into an entire life plan. However, not all policies and companies offer this option; therefore, it’s best to consult your agent to determine if conversion is available.

Some policies already supply a built-in conversion feature, while others require purchasing an additional rider. Additionally, there exists the prospect that no conversation selection is accessible at all. Thus, ensure that you understand what kind of conversation choices are attainable before finalizing any decision regarding your policy!

Can I Convert My Term Life Insurance To Whole?

How Do I Convert Term Life Insurance To Whole Life?

If you’re considering converting your term life insurance policy to a whole policy after it expires, here are the steps that might help:

  • Inquire with your life insurance company about the different types of permanent life insurance and their associated conversion cost.
  • Fill out a conversion application to convert your life insurance policy.
  • Choose the amount of life insurance you want in the conversion.
  • Select your desired payment plan – annual, quarterly, or monthly – to settle the premiums.
  • Appoint beneficiaries and include their Social Security numbers when necessary.

What Is Conversion Privilege Contract Life Insurance?

By signing a conversion privilege contract, life insurance policyholders can switch their coverage without providing proof of insurability. This incredibly advantageous agreement allows them increased flexibility in protecting themselves and those they love. With conversion privilege, policyholders can exchange their current life insurance policy for another without going through the lengthy application process. This saves time, money, and effort in ensuring they have the right amount and type of coverage for their needs.

Another great benefit of conversion privilege is that policyholders can change their death benefit amounts as needed and even convert their permanent life insurance policy into an annuity or another investment account. This allows them to securely invest and grow their money over time without leaving the comfort of their existing policy.

What Is Conversion Privilege Contract Life Insurance?

What Is A Term Conversion Credit?

Before you consider converting your term life insurance policy, make sure that you inquire about the potential conversion credits specific insurers provide. These discounts could help minimize premiums for the initial year and lead to significant payment cost savings.

Conversion credits can also apply to any riders attached to your existing policy. For example, disability or accidental death coverage included in a term life insurance policy could be converted into permanent coverage with the help of conversion credits.

Along with financial considerations, you should reflect on your current and future life circumstances when deciding whether to convert your term life insurance policy. I plan on starting a family soon. A permanent life insurance policy could be beneficial as it provides coverage for your entire lifetime and offers fixed premiums, even if your health changes.

How Much Does It Cost To Convert Term To Whole Life Insurance?

Converting from a term to a whole policy won’t cost you anything upfront, but be ready for your premiums to significantly raise after the conversion – usually by five to fifteen times as much. Permanent life insurance is far more expensive than its temporary counterpart.

However, it also offers more benefits. For example, whole-life coverage provides policyholders with death benefit protection for their entire lives and the possibility of growing cash value that can be used to supplement income in retirement or meet unexpected expenses. Plus, there are options to borrow against the cash value and pay the loan back over time without surrendering the policy.

Another advantage of whole policies is the potential for dividend payouts. Dividends are paid in cash or used to reduce premiums, accumulate additional policy values, or purchase more insurance coverage. Some companies also allow policyholders to invest their dividends into mutual funds at higher rates of return than regular savings accounts.

Finally, whole policies can be used as collateral for a loan. Doing this gives you access to funds as a loan without having to surrender your policy or pay income taxes on any withdrawn cash accumulation.

How Much Does It Cost To Convert Term To Whole Life Insurance?

What Are The Advantages Of Converting Term Life Insurance To A Whole Life Insurance Policy?

A key benefit of converting term life insurance to a whole insurance policy is the potential for continued coverage. Unlike a term policy, which typically ends after a certain period, a whole insurance policy provides lifelong protection against death. Some other main advantages are:

  • Full-life policies can accumulate cash value over time. This means that you may be able to receive a cash payout if the policy is surrendered before death.
  • Converting your term policy to a whole policy can save money in the long run because it may be less expensive than purchasing two separate policies.
  • With full-life coverage, you have the flexibility to adjust certain aspects of your coverage as needed. This allows you to stay up-to-date with your life insurance needs as they change over time.

What Are The Disadvantages Of Converting Term Life Insurance To A Whole Life Insurance Policy?

The disadvantages of converting term life insurance to a whole life policy include the following:

  • Higher Premiums: The premium for full coverage is generally much higher than for term life coverage because the insurer is taking on more risk by providing lifelong coverage.
  • Less Flexibility: While you can typically adjust the death benefit and other features of a term life policy to meet your changing needs, the features of a whole life policy are usually fixed and cannot be adjusted.
  • Limited Liquidity: While cash values can accumulate over time, they may not offer as much liquidity as other investments. For example, suppose you need access to funds during an emergency. In that case, you may not be able to access the cash benefit from a permanent life policy as quickly as you would from other types of investments, such as stocks and mutual funds.

Is It Worth Converting Term Life To Whole Life Insurance?

Converting from term life to whole life insurance can be a complex decision. Therefore, it is essential to carefully weigh the pros and cons before making this decision. While there are some potential advantages to converting, such as gaining access to cash accumulation that can be borrowed against, it also comes with additional costs that may not be worth it for everyone.

Next Steps

There are many factors to consider when determining whether you should convert your term life policy to whole life insurance. Ultimately, the decision comes down to your circumstances and what is best for you and your family. Some people may find that converting their policy makes sense, while others may decide that staying with a term life policy meets their needs. If you’re unsure what is right, contact us to discuss this further and get a free quote!

Converting Term To Whole Life Insurance

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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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