Term life insurance is a popular choice for people who want to protect their loved ones financially in the event that they pass away unexpectedly. However, as individuals grow older and their financial situation changes, they may consider converting their term life insurance policy to a permanent one. Permanent life insurance policies offer numerous advantages that term life insurance does not, including lifelong coverage, cash value accumulation, the ability to borrow against the policy, and more. In this article, we will explore why someone might choose to convert their term life insurance policy to permanent and the benefits that come along with it.
Term life insurance is a popular choice for many individuals who want to ensure that their loved ones are financially protected in the event of their untimely death. However, as people age and their financial needs change, they may consider converting their term life insurance policy to a permanent one. Permanent life insurance offers a range of benefits that term life insurance does not, including lifelong coverage, cash value accumulation, and the ability to borrow against the policy. Here are some reasons why someone might choose to convert their term life insurance to permanent:
If you need life insurance coverage for a longer period than the term of your current policy, you might consider converting from term life to whole life insurance. Here are some common scenarios in which switching to a permanent policy makes sense:
|Scenario||Reason for Conversion|
|Unforeseen dependency||Converting to permanent insurance can help provide for the unexpected needs of loved ones.|
|Outstanding debt||Converting to whole life maintains coverage for the entirety of your life and protects your family financially.|
|Avoiding underwriting||Converting may allow you to avoid the medical exam and lifestyle assessment required for a new whole life insurance policy.|
|Partial conversion||Converting a portion of your term policy to whole life can result in a smaller death benefit and lower premiums.|
When switching from term to whole life insurance, you need to determine if your policy has a conversion provision or a term conversion rider. If your insurer allows it, a partial conversion enables you to convert only a portion of your term life policy to whole life. Purchasing another term life insurance policy could make sense if you only want life insurance coverage for a short amount of additional time rather than for the rest of your life. Another option available for those worried about leaving their family with funeral costs is to purchase final expense insurance.
Before making any changes, it’s best to consult with your life insurance company or agent to review your options and ensure you make the best decision for your current and future needs.
A term-to-permanent life insurance conversion, or “term-to-perm” conversion, allows you to extend your life insurance coverage. Instead of letting it 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||Examples|
|Extend coverage||As a term policy approaches the end of its coverage period|
|Health has worsened||If your health has worsened and you need coverage for a longer period of time, a conversion may be your best (or only) option.|
|Upgrade to a longer-lasting policy||Maybe you originally wanted permanent life insurance, but the higher cost kept you from purchasing it.|
|Responsibility for someone who will always be financially dependent on you||For example, a child with special needs|
|Business continuity planning||If unexpected business obligations arise|
|Updated financial approach||As you grow older, your financial goals may simply shift.|
You may be able to convert all or some of your term life insurance to permanent life insurance. There is usually no direct cost to convert term life insurance to a permanent policy. However, your premium payments will likely be higher.
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.
Ready to learn more about your life insurance options? Connect with a financial advisor near you.
Term life insurance policies are issued for a fixed period, and once the term expires, the policy is no longer valid. However, if you do not need the policy anymore, you can surrender it before the expiration date and receive back some of the premiums paid in advance that are not used up by the time of surrender.
|Policy Type||Term Life Insurance|
|Validity||Fixed period (e.g., 10 or 20 years)|
|Surrender Option||Available before expiration date|
|Premium Refund||Depends on policy tenure and coverage plan|
If you wish to transfer your term life insurance policy to another company, you need to surrender the policy with the current insurer and purchase a new policy with the new insurer. You cannot directly transfer the policy to another company.
It is important to note that diabetics are considered high risk by insurance companies, and the cost of coverage is usually higher for them. However, there are certain types of policies that diabetic people can get to help protect themselves against financial loss due to their illness, such as critical illness cover and income protection cover. Diabetics can also get term life insurance in India as long as they have a certificate from a qualified doctor.
In conclusion, while you cannot directly transfer your term life insurance policy to another company, you can surrender it before the expiration date and purchase a new policy with a different insurer. It is important to compare policies and coverage plans to find the best option for your needs and medical condition.
If you’re considering life insurance, you may be wondering if it’s worth getting permanent life insurance. Permanent life insurance is a policy that provides lifelong coverage and offers more flexibility in paying premiums and gaining access to cash value. While these policies are usually more expensive than term life insurance, they offer lifelong death benefits and can be used to supplement retirement income, pay off debt, or fund other long-term goals.
There are four popular types of permanent, cash-value life insurance policies:
|Whole Life Insurance||Provides coverage for the policyholder’s entire life, combines an investment component with the policy’s death benefit, and offers tax-advantaged savings and guaranteed death benefit payout.|
|Universal Life Insurance||Offers flexible premiums, death benefit options, and cash value accumulation, allowing policyholders to adjust their coverage as their needs change over time.|
|Variable Universal Life Insurance||Combines the benefits of whole life and term insurance, with personalized coverage options and investment opportunities, allowing policyholders to adjust their premium payments, death benefit amount, and investment portfolio.|
|Indexed Variable Universal Life Insurance||Combines the benefits of universal and variable life insurance, with a cash value that can be linked to market performance, and offers flexible premium payments, death benefits, and additional coverage options.|
The best age to get permanent life insurance is usually between 30 and 50, as premiums are typically lower and you’re more likely to be healthy during this period. However, the right time for you may vary depending on your financial situation and goals. If you’re over 50, it’s still possible to get permanent life insurance, but premiums may be more expensive. Consult with an experienced financial adviser to determine the right time and policy for your needs.
Permanent life insurance can provide lifelong coverage and offer many benefits, such as building cash value and protecting your family during death. However, these policies can also have higher premiums, lower liquidity, and may not provide sufficient returns. It’s essential to consider the drawbacks and benefits when deciding whether to invest in permanent life insurance.
Permanent life insurance can be an excellent investment and provide many benefits, but it’s essential to understand the features and weigh the risks against the rewards. Consider your financial situation and goals and consult with an experienced financial adviser to determine if permanent life insurance is worth it for you.
Term life insurance policies can be a great option for families, as they offer coverage for the most crucial financial years. However, as goals and needs change, policyholders may find that their term length is no longer sufficient. Fortunately, most term life policies offer the option to convert them into permanent policies, which can offer lifetime coverage. Here’s what you need to know about converting term life to permanent life insurance.
|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 policy to a permanent policy is simple and does not require a medical exam or underwriting process. However, policyholders should consider several factors, such as the conversion period, the impact on premium rates, and the type of policy they want to convert to. It’s also important to have a clear goal in mind for the conversion, as well as an understanding of what policies are available and what long-term care benefits may be included.
Before converting, policyholders should consult with their insurance agent or company and ask themselves what their objective is for converting, what they can afford, what permanent policies are available, and whether they can get a long-term care benefit or a rising death benefit. It’s also important to shop around and compare rates from other insurers to ensure that converting is the best option for their needs and budget.
Term conversion is a process where you convert your term life insurance policy into a permanent life insurance policy. This process is allowed by most term policies, and you can convert some or all of your coverage into a permanent policy within a specific time frame. Permanent life insurance policies are those policies that do not expire and last for the insured’s lifetime, as long as premiums are paid as per policy terms.
Compared to term life insurance, permanent life insurance policies generally cost more in premiums but offer various advantages, such as:
|Savings||Permanent life insurance policies have the potential to build cash value, which grows tax-deferred and can be used for various reasons, such as building a nest egg for retirement, boosting the death benefit, or supplementing retirement income through a policy loan.|
|Easy Conversion||Converting your term policy to a permanent life insurance policy is often simpler than buying a new policy since most insurance companies allow conversion without requiring underwriting again.|
|Budget Flexibility||If your budget allows, you can upgrade your coverage at a higher premium through a permanent policy.|
|Final Expenses||Converting to a permanent policy ensures that you continue to have death benefit protection, which can help your family pay for your final expenses.|
Converting your term life policy to a permanent policy is a simple process that involves talking to your agent, reading your policy to confirm the conversion option, and determining the length of the conversion period. You should also consider various factors, such as the kinds of permanent policies available, the conversion charges, and whether you should convert the policy all at once or in installments.
Once you discuss the term conversion with your agent and are satisfied with the new policy, you can make the change. With term conversion credit, you can enjoy the benefits of permanent life insurance policies without starting the process from scratch.
If you have group term life insurance through work and decide to leave your place of employment, you may or may not have the option to keep your coverage in some form. If you do have the option to keep coverage, which means it is convertible – and you may convert it to a whole life policy – or it is portable – and you can take the coverage with you. (It’s important to note that some individual, or non-group term, policies have a conversion right as well.)
|Convertible Policy||Portable Policy|
|Converts group or term life insurance to a whole life policy||Remains term life insurance, but can be taken with you if you leave your place of employment|
|Varies by state in terms of what the policy can be converted to||Typically only available for term life insurance policies|
|Premiums are typically more expensive||Premiums can fluctuate, but are generally less expensive|
Essentially, life insurance policies that are convertible can be converted from term coverage to whole coverage. Portable policies allow you to take coverage with you, even if you leave the place of employment where you initially enrolled in a group term policy.
There are advantages and disadvantages to portable and convertible policies. For example, if you decide to make your policy portable, the premiums may be less expensive than if you decided to convert it. In other words, if you decide to convert your policy to a whole life insurance policy, the premiums may be more expensive. However, with portable policies the premium may fluctuate, whereas convertible policies maintain the same premium over time.
If you have questions about convertible or portable policies, speak to a licensed insurance agent. If you have a policy in place and want to know about its conversion or portability privilege, contact a licensed insurance agent from the insurance company that issued the policy or speak to your benefits administrator.
The two common types of life insurance are term life insurance and permanent life insurance. While the latter provides coverage for your entire life as well as a cash value component that can grow over time, it has some downsides that should be considered before making a decision.
|Type of Policy||Description|
|Whole life insurance||Offers a death benefit as well as a savings component. Regular premiums are paid for a set death benefit amount, and the savings portion is contingent upon the dividends that a company pays.|
|Universal life insurance||Has more flexibility than whole life policies, with adjustable premiums that are typically lower than whole life insurance premiums.|
|Variable universal life insurance||Has a savings component that can be invested in stocks, bonds and money market funds. The value of this policy can grow quickly, but the risk of the stock market may affect the value as well. Some variable universal life policies have a guarantee that your death benefit will not fall below a minimum amount.|
|Indexed universal life insurance||Allows policyholders to allocate the cash value of the policy to a fixed account or an equity index account. You can grow your cash value tax-deferred for retirement while still growing your death benefit.|
|Guaranteed life insurance||Has a guaranteed death benefit provided that the policyholder pays the premiums to keep the policy active. It typically has lower premiums than whole life insurance, because it does not have a cash value accumulation.|
The biggest drawback of permanent life insurance is that it is significantly more expensive than term life insurance. In addition:
While there are advantages to purchasing this type of policy, there are also downsides. Therefore, before committing to buy a permanent life insurance policy, whether whole life or cash value, universal or variable, make sure you know what you’re getting – and not getting.
A term life insurance policy is a short-term coverage that provides a death benefit to beneficiaries. On the other hand, whole life insurance is a permanent policy that covers an individual for their entire life and has cash value. If you are considering converting your term life insurance policy to a whole life policy, there are advantages and disadvantages to consider.
Converting from term life to whole life insurance provides several benefits, including:
|Provides lifelong protection against death|
|Offers fixed premiums, even if your health changes|
|Provides access to cash accumulation that can be borrowed against|
|Potential for dividend payouts, which can be used to reduce premiums or purchase more insurance coverage|
|Can be used as collateral for a loan|
There are also some disadvantages to converting, including:
|Premiums on whole policies are typically more expensive than term life insurance policies|
|Depending on the policy and provider, there may be restrictions on borrowing or withdrawing from the accumulated cash value|
|If premiums are not paid as specified by the policy, coverage could be canceled, and you could lose any money placed into the policy|
Before deciding to convert your term life insurance policy to a whole life policy, it is essential to weigh the pros and cons carefully. Consider your current and future life circumstances, as well as the costs and benefits of each type of policy. Ultimately, the decision comes down to what is best for you and your family. Consult with a licensed insurance professional to discuss your options and get a free quote.
A term life insurance policy provides coverage for a specific term or period of time, typically between 10 and 30 years, and is designed only to give your beneficiaries a payout if you pass away during the term. If your policy’s term is coming to an end, you have three basic choices to continue the financial protection of life insurance.
|Extend your current term policy||Renew your policy on a year-to-year basis until you are 95 years old, but the insurance company will change your premium if you extend.|
|Convert your term policy to a permanent policy||Convert your term policy into a permanent policy without having to provide evidence of insurability, but there will be a specific deadline depending on your insurer.|
|Get a different life insurance policy||Shop around for a new term-life policy or check with your HR department to see if group term life insurance coverage is available through your company.|
If you want to extend or convert your current term policy, talk to your life insurance company, agent, or broker well before it expires. If you’re thinking of getting a new policy, a good place to start is to get an instant quote from a life insurance calculator. Combining a permanent (whole or universal) policy with a term policy can be one way to get the higher death benefit and additional coverage you need for a limited period of time.
There is no specific expiry date for converting a life insurance term, but it is recommended to begin the conversion process well before your term expires – at least a year before your policy’s stated conversion deadline. A Guardian financial professional can help you better understand your options.
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