What Is Life Insurance Conversion?

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A term-to-permanent life insurance conversion, or “term-to-perm” conversion, allows you to extend your life insurance coverage. Instead of letting your term policy expire, you may be able to exchange it for a permanent policy without needing a new medical exam. After switching to the permanent policy, you’ll have a death benefit that lasts your entire life (as long as premiums are paid and the contract retains value). The new policy’s premium payments will likely be higher.

Reasons to Consider Converting Your Term Life Policy

Reasons to Consider Converting Your Term Life Policy
As a term policy approaches the end of its coverage period
If your health has worsened and you need coverage for a longer period of time
Maybe you originally wanted permanent life insurance
You now have responsibility for someone who will always be financially dependent on you
Sometimes, life insurance is used as part of business continuity planning
As you grow older, your financial goals may simply shift

Term life insurance is built to last until the end of the time period you selected. After that, you may see steep price increases to continue coverage. If you’re still alive when your term life insurance policy expires, there is no financial payout or cash value. On the expiration date, you’ll be faced with four choices:

  1. Go without life insurance.
  2. Renew your term life insurance.
  3. Open a new term or permanent life insurance policy.
  4. Convert your term policy.

How to Convert Term to Perm Life Insurance

Choose a type of permanent life insurance that aligns with your financial goals and strategy. During a term-to-permanent conversion, your permanent life insurance choices will vary based on your insurer. Choices may include whole, universal or variable universal life insurance.

Convert from term to perm life insurance by following these four steps:

  1. Find your conversion deadline.
  2. Choose the type of permanent life insurance you want.
  3. Calculate the new policy cost.
  4. Convert.

There is usually no direct cost to convert term life insurance to a permanent policy. However, your premium payments will likely be higher. You may be able to convert all or some of your term life insurance to permanent life insurance. If you choose a total conversion, the amount of your new coverage will be the same as you had for term insurance. If you choose a partial conversion, you’ll convert just part of your existing life insurance.

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