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

Shawn Plummer

CEO, The Annuity Expert

Hello, reader! Today, we will unravel the mysteries around a critical topic that seems to raise more questions than answers: converting term to whole life insurance. Whether you’re a young adult stepping into life insurance or an experienced policyholder contemplating change, this comprehensive guide is designed with your interests in mind. You’ll find the expertise you seek wrapped in friendly, understandable language.

Can I Switch My Term Life Insurance to Whole Life?

The short answer is yes; you can switch your term life insurance to whole life insurance. However, the ability to make this switch often depends on the specifics of your current term life insurance policy. Some term life insurance policies include a conversion feature, a rider that allows policyholders to change their term life policy into a whole life policy.

Example: Imagine you’ve purchased a term life insurance policy with a 20-year term. It includes a conversion feature allowing you to convert your policy to whole life insurance at any point during the term or until you’re 65 – whichever comes first.

Converting Term To Whole Life Insurance

What Does It Mean to Convert Term to Whole Life?

When we talk about converting term to whole life insurance, it’s all about transitioning from one type of life insurance coverage to another. Term life insurance is like a lease: you’re covered for a specific term, and if the policyholder doesn’t die within this term, the insurance company doesn’t pay any death benefits. On the other hand, whole life insurance is like owning a home. It’s permanent and has an investment component known as cash value that grows over time.

Example: Consider the term life policy as renting an apartment for 20 years. You have shelter and security but no property ownership. Conversely, a whole life policy is like buying a house, where you have the same shelter and security but also build equity over time.

How to Convert Term to Whole Life Insurance?

Check Your Current Policy

Before you set out to convert your policy, look at your current term life policy. Ensure that it includes a conversion feature.

Contact Your Insurance Provider

Reach out to your life insurance provider. They will guide you through the process and explain any applicable charges.

Choose the Whole Life Policy You Want

Review the different types of whole life insurance policies your provider offers and choose one that fits your needs and financial goals.

Example: If you’re looking for a policy that offers both death benefits and a savings element, you might opt for a traditional whole life insurance policy.

Is It Worth Converting Term to Whole Life Insurance?

Determining the worth of converting your term life insurance to whole life insurance depends mainly on individual circumstances. It might be worth it if you need coverage for your entire life or want to accumulate cash value as an investment. However, it’s essential to remember that whole life insurance premiums are typically higher than term life premiums.

Example: If you’re someone nearing the end of your term life policy and still need coverage, converting to whole life insurance can make sense.

Converting Term Life Insurance To Whole Life Insurance

When Can I Convert My Term Life Insurance Policy to a Whole Life Insurance Policy?

The exact timing for converting a term policy to whole life depends on the specifications of your policy. Usually, the conversion privilege period may extend through the end of the term or until the policyholder reaches a certain age.

Example: Your term life policy allows conversion until you turn 70. If you’re 65 now and you’ve decided whole life insurance better fits your needs, this would be an excellent time to convert.

Next Steps

Navigating the world of life insurance can be challenging, but with the correct information at your disposal, you can make informed decisions that align with your unique needs and goals. Converting term to whole life insurance can be viable for many, offering lifelong coverage and an investment component that term insurance does not. However, reviewing your current policy, assessing your financial situation, and considering your future needs is essential before making this significant decision. And remember, when it comes to insurance, there’s no one-size-fits-all solution; what works best for you is deeply personal and dependent on your circumstances.

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Frequently Asked Questions

Is it worth converting the term to whole life?

While converting your term life insurance policy to a whole life insurance policy is free of charge, it’s important to note that your premium may increase due to the higher risk associated with insuring older policyholders. If you require coverage after the term of your policy ends, it’s worth considering this option.

Does Suze Orman recommend term or whole life insurance?

According to Suze Orman, buying whole life insurance as an investment is not a good idea due to expensive fees and overly conservative portfolios. Therefore, it’s better to keep insurance and investments separate and opt for term life insurance instead of whole life.

Why is whole life more expensive than term?

Although whole life insurance provides more long-term security, its premiums are generally higher than term life insurance. This is because payments are deposited into an account that increases in value over time. On the other hand, term life insurance usually has lower premiums.

What happens when you convert a term policy?

A-to-permanent life insurance conversion is a way to continue your life insurance coverage. If you currently have a term life insurance contract for 10, 15, 20, or 30 years, you may be able to convert it to a permanent policy without requiring a new medical exam instead of letting it expire.

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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