What Are The Pros And Cons Of Convertible Term Life Insurance?

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Convertible term life insurance is a type of term life policy that comes with a provision or “rider” that gives the policyholder the option to convert to a permanent life policy later on. This type of policy can offer many benefits, but it also has its drawbacks.


Here are some of the advantages of convertible term life insurance:

Advantages Explanation
Keep your health rating Conversion allows you to keep the health rating you had when the policy started, with no health questions or medical exams to uncover health issues that might raise your premium cost.
Flexibility A convertible policy can give you the flexibility you need to adapt to changing situations, such as having another child or supporting other family dependents.
Extension option Convertibility gives you an added extension option if you need it later on, which can be useful if you’re concerned about the higher cost to renew coverage when you’re ten years older.
Build cash value Permanent life insurance policies, such as whole life policies, typically cost more than term life but provide benefits term life can’t offer, including building cash value, which can be borrowed against or used to supplement retirement income.


Here are some of the disadvantages of convertible term life insurance:

Disadvantages Explanation
Higher cost A convertible policy may be fractionally more expensive than a non-convertible policy, but the cost is generally worth the added benefits.
Not needed for all situations If you already have permanent protection or are purchasing life insurance to protect yourself from a specific, limited-time financial obligation, such as a mortgage, then convertibility may not be necessary.
May not be portable If you get life insurance through your workplace, the policy offered may not be convertible or even portable, meaning you can’t continue coverage if you leave your employer.

Overall, convertible term life insurance can provide more financial confidence and flexibility for the policyholder, but it’s not necessary for all situations and may come with a higher cost. It’s essential to speak with a financial professional to understand what life insurance products are available for sale and which options fit your immediate needs and long-term goals.

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