What is Convertible Term Life Insurance?

Is Having a Convertible Option for Permanent Coverage Worth it?

Nov 5, 2009

It can be hard to choose between term life insurance and permanent coverage. One alternative is convertible term life insurance that can be changed to whole life later.

Although many consumers appreciate the benefits of whole life insurance many will start out with term policies because of their lower costs. Later in life they may wish they had taken out permanent coverage but may feel it is too late and too expensive to start again from scratch. A convertible term life insurance policy may be an alternative solution worth looking at.

How Does a Convertible Term Life Insurance Policy Work?

Basically these policies will work like standard term products. The policyholder will be given life insurance for a specified number of years until the close date. But, unlike standard policies, a convertible product adds some flexibility to the mix.

So, for example, the policyholder may be given the option to change their insurance to a different type (such as a whole life product) if the company offers this as a product. Here, they can simply ask to have their term coverage converted to permanent if they wish to make a change.

What are the Advantages of Convertible Life Insurance?

Although many people start off in life with term insurance, many then go on to wish that they had permanent coverage. They may, for example, not have been able to afford whole life cover when they first insured themselves or they may simply decide it will be a better option down the line. This kind of policy simply gives the flexibility to change at a later date if they wish.

This may also work out to be more cost effective for those wishing to switch later in life. Taking out a policy that allows them to convert may also give them "guaranteed insurability." This means that they could get a new permanent policy without having to go through new medical underwriting checks.

Plus any medical conditions that they have developed since they took out their insurance should not affect their premium costs in the same way that they might if they were looking for a new policy. This can be important as people get older.

Things to Consider With Convertible Insurance Products

It is important to read the terms and conditions of any insurance policy before taking one out and convertible products are no different. The option to convert may not be the same with every insurer so this may be worth looking at. It is common for a time limit to be placed on conversions so the ability to change may end before the policy does.

The option to convert may also depend on the products that the insurer offers generally. The individual can only switch to a whole life product that the company already has in place, for example. If the plan is to start with a term product and then to convert it later then it is still important to make sure that the initial policy gives enough coverage.

Premium costs for a convertible life policy may be higher in some cases than for fixed products. It is, therefore, a good idea to shop around and to make sure that the insurance chosen comes at the most affordable cost.

The copyright of the article What is Convertible Term Life Insurance? in Life Insurance is owned by Carol Finch. Permission to republish What is Convertible Term Life Insurance? in print or online must be granted by the author in writing.