What is Term Conversion?
Term Conversion is a feature in many term life insurance policies that allows policyholders to convert their existing term coverage into a permanent life insurance policy. This can be done without undergoing a new medical examination or proving insurability, making it an attractive option for those who want lifelong coverage or to take advantage of a policy’s cash value benefits.
Typically, term life insurance policies have a conversion period during which the conversion can take place. This period varies by insurer but often falls within the first few years of the policy or up to a certain age. The new permanent policy can be whole life, universal life, or another type of permanent insurance, depending on the options offered by the insurance provider.
Converting to a permanent policy may result in higher premiums, as the new policy will provide lifetime coverage and may include additional benefits like cash value accumulation. However, it offers the advantage of maintaining coverage even if the policyholder’s health has changed, which might make obtaining new insurance difficult or more expensive.
Term Conversion is a useful strategy for those looking to maintain coverage long-term, especially when facing changing health circumstances or when financial situations allow for the higher premiums of permanent insurance.