What Is Convertible Term Life Insurance?

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Convertible term assurance is a type of term policy that allows you to convert to a whole of life policy at the end of the policy term, without providing new medical information. It provides the flexibility to keep your life cover in place if your needs change in the future.

Key features of the conversion option:

Pros Cons
Provides flexibility to convert to a whole of life policy Premiums may increase
No need to provide new medical information Not all policies come with the conversion option and those without added options may be cheaper

Convertible term assurance works by giving you the flexibility to convert your term life policy to a whole of life policy at the end of its term. If you have the conversion option included in your policy, then you could convert the term-based policy to a whole of life policy just before it expires. Whole of life insurance provides cover until you pass away and a pay-out is guaranteed to your loved ones.

Term life insurance provides financial protection for your loved ones if you were to pass away unexpectedly during the term of the policy. It pays out a fixed cash lump sum in the event of your death. The cost of term life insurance is calculated based on your individual circumstances and the terms of the policy. An insurer takes into account factors such as your age, health, and lifestyle when determining your premium.

Convertible term and renewable term insurance are both options that can be added to a term life insurance policy. While the conversion option allows you to convert the existing policy to a different policy (whole of life), the renewable option allows you to extend the existing policy. With both options, you usually won’t need to provide any new medical information when the time comes to secure the new cover. Typically, you can’t have convertible term and renewable term options included under one policy.

Whole of life insurance is generally more expensive than term life insurance with the conversion option. Taking out a whole life policy initially while you’re still fairly young means paying a higher premium for a longer amount of time. If you’re young and healthy, then term life insurance with the conversion option can provide affordable protection while your family may need it the most, with the flexibility to convert to whole of life later on, which guarantees to pay out (perhaps providing loved ones with an inheritance).

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