What Is Term Life Insurance Conversion Credit?
If you have a term life insurance policy and wish to extend your coverage, you may consider a term-to-permanent life insurance conversion, or “term-to-perm” conversion. Simply put, it allows you to exchange your existing term life insurance policy for a permanent one 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 you pay the premiums and the contract retains its value.
Here’s what you need to know about converting term life insurance to permanent life insurance:
Why Should You Consider Converting Your Term Life Policy?
There are several reasons why you might want to consider converting your term life policy:
| Reasons to Consider Conversion |
|---|
| Your term policy is about to expire |
| Your health has worsened, and you need coverage for a longer period |
| You wanted permanent life insurance, but the higher cost kept you from purchasing it |
| You now have responsibility for someone who will always be financially dependent on you |
| You need to update plans for inter-generational wealth transfer |
| Life insurance is part of your business continuity planning |
| Your financial goals have changed |
To convert your term life insurance to permanent life insurance, follow these four steps:
How to Convert Your Term Life Policy to Permanent Life Insurance
- Find your conversion deadline.
- Choose the type of permanent life insurance you want.
- Calculate the new policy cost.
- Convert.
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.
Generally, there is 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.
It’s important to note that you’ll need to be within your policy’s conversion window, which varies by insurer. Some insurers allow you to convert throughout the duration of the contract, while others only allow conversions during the first few years your policy is active.
If you’re not sure whether converting your term life insurance policy is the right choice for you, consider consulting with a financial advisor. They can help you determine whether a term-to-permanent life insurance conversion is the right step based on your financial goals.
