Term life insurance provides coverage for a set period, typically for 10, 15, or 20 years, and can be an affordable way to protect your loved ones. However, if you feel that you will need life insurance beyond that period, it might be worth considering trading in your term policy for permanent coverage. Permanent insurance can last as long as you live and offer other benefits, although it is usually more expensive than term coverage.
Most term life insurance policies are convertible, meaning they can be exchanged for permanent policies issued by the same insurance company. The term policy will state whether it is convertible, along with any time limits on making the move. If your policy does not have this information, contact your insurer or talk to a financial professional about your options.
Whether to convert your policy depends on your situation and financial goals. Consider converting if you can afford the higher premiums and want:
|Lifetime coverage||Permanent insurance provides coverage for your entire life, unlike term insurance which expires after a set period.|
|Cash value||Permanent insurance policies accumulate cash value over time, which can be borrowed against or used to pay premiums.|
|Estate planning||Permanent insurance can be used to transfer wealth to heirs and pay estate taxes.|
Policy details may differ, but for most term conversions, you can convert just part of your policy to permanent insurance if you want to keep some term insurance. Combining term and permanent insurance can make sense if, for example, you want extra protection until your kids graduate from college but want to focus on other financial needs afterward.
If you renew your term policy, the policy’s term and set cost will expire, but you can continue coverage if you are willing to pay more. Some policies are renewable and can be extended, often one year at a time, until a certain age, like 90 or 95. Although you likely won’t need a medical exam to renew, the cost will increase because it will be based on your age at the time.
In conclusion, if you already have a term policy, find out if it’s convertible and what, if any, limits apply. If you’re planning to buy term insurance and want to be able to convert it, be sure to specify that you want convertible term. Combining term and permanent insurance can be a smart way to protect your loved ones while also addressing your long-term financial goals.
- Advisor Group. Convertible Insurance: Meaning, Pros And Cons, Example
- Financial Services Regulatory Authority of Ontario. What Is Convertible Term Life Insurance?
- Washington State Office of the Insurance Commissioner. What Is A Convertible Term Life Insurance Policy?
- Financial Services Regulatory Authority of Ontario. Why You Should Consider Convertible Term Life Insurance
- DFS (Department of Financial Services). Convertible Term Assurance [What Does It Mean?]