Can A Term Life Policy Be Converted Into A Permanent Policy?

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If you choose the right term life insurance length, the coverage will be in force during the most crucial financial years for your family—for example, up until the point your mortgage is paid off or your kids have made it through college. But goals can change. You might later find that the term length of your life insurance policy isn’t long enough to meet your needs. You might even decide that what you really want is coverage that lasts a lifetime. Does that mean you have to go back to square one and get a new policy? Not necessarily.

Term life insurance policies typically offer the option to convert them into permanent life insurance policies. Making the switch is easy, but deciding whether it’s the right move isn’t that simple. Here’s what you need to know about how and why to convert term life to permanent life insurance.

Policyholder Policy Annual Premium
30-year-old male, nonsmoker, excellent health 30-year term, $500,000 death benefit $368.20 (preferred plus rate)
Same male, now age 40 Converted to a guaranteed universal life, $500,000 death benefit $4,580 (preferred plus rate)

Converting a term life policy to a permanent policy is much simpler than applying for a new policy. First, check the language of your policy to see if conversion is an option (it is on most policies). Next, check the term conversion period—the time frame during which you can convert. Then contact your insurance agent or company to ask to convert your policy. You won’t have to take a life insurance medical exam or go through the underwriting process.

There are no fees to convert a term policy to a permanent policy, but the rate you pay for coverage will increase. Although your health won’t be a factor because you lock in your original underwriting class, your age when you convert will affect your rate. The amount you convert also will impact your premium. For example, if you have a policy with a $500,000 death benefit, you could convert just $250,000 of it to a permanent policy. When you convert might also affect your rate.

Before you convert a term policy, there are several questions you should ask yourself and your life insurance agent or company. You need to know your objective when converting to a permanent policy. You will pay more for a permanent policy, so you need to consider not only whether you can afford the higher premiums now but also in retirement. You might only be able to convert to a universal life policy, so check with your insurer to see what policies are available before committing to a conversion.

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