Term life insurance is one of the most popular and affordable ways to financially protect your family. It provides coverage for a specific period, often 10, 20, or 30 years, with the promise of a death benefit if the insured passes away during that time.
But what happens when the term ends?
Or what happens if your health takes a turn for the worse?
That’s where the convertibility option comes in. It is a built-in feature of many term life policies that’s often overlooked but can be incredibly valuable.
A convertibility option allows a policyholder to convert their term life insurance into a permanent life insurance policy without undergoing a new medical exam or fresh underwriting. Permanent life insurance policies include whole, universal, and variable life insurance. This means that even if your health has declined since you first purchased your term policy, you can still secure permanent coverage based on your original health classification.
Think of it as a form of insurance within your insurance policy: you're not just protecting your loved ones during the term, you're also protecting your insurability if your needs or health status change down the line.
The specific permanent policies available for conversion will depend on your insurer, but most allow conversion to:
Some insurers may offer conversion to a limited set of permanent policies or even a single designated product. It’s important to understand your options early, as most policies have an age or time-based limit on when conversion is allowed. The most common age when conversion must occur is 65 or within the first 10 to 20 years of the term.
Life changes quickly, and so can your insurance needs. Here are a few instances when converting your term policy might make sense:
Permanent life insurance comes at a higher cost than term coverage, often significantly so. When you convert, you lock in your health rating from when you first bought the term policy, which could save you thousands in premiums if your health has declined.
However, if you’re still in excellent health and want permanent coverage, it may be more cost-effective to apply for a new policy and go through fresh underwriting to secure better pricing. This decision requires careful comparison between your current health, the cost of converting, and available new policy options.
The convertibility option is one of the most valuable, yet underutilized features of term life insurance. It provides flexibility, future planning advantages, and most importantly, the ability to secure lifelong coverage regardless of future health changes.
If you have a term policy, don’t wait until the last year to explore your options. Contact our office for assistance in making an informed decision that protects both your health and your financial future.