What is Conversion Privilege?
Conversion Privilege is a feature in many term life insurance policies that grants the policyholder the option to convert their term policy into a permanent life insurance policy, such as Whole Life or Universal Life, without undergoing a medical exam or providing additional evidence of insurability. This means that regardless of any changes in the policyholder’s health status, they can switch to a permanent policy without risk of denial or increased premiums due to health conditions.
The Conversion Privilege is beneficial for individuals who initially chose term life insurance for its affordability but later wish to have lifelong coverage or build cash value through a permanent policy. This option typically needs to be exercised within a specified time frame, such as the first 10 or 15 years of the term policy, or before a certain age, like 65.
For example, if a policyholder’s health declines during the term of their policy, they can use the Conversion Privilege to secure permanent life insurance with the same health rating they had when they initially purchased the term policy. This provides flexibility and security, ensuring that they maintain life insurance coverage as their needs evolve.