Converting Term to Whole Life Insurance

• Converting from term life insurance to whole life insurance means switching from coverage for a fixed period of time to lifetime coverage.
• When you switch, the premium cost will likely rise as whole life insurance is usually more expensive than term.
• Premiums may also vary across age, health, and coverage amount.
• Besides conversion, you can also consider other alternatives such as renewing or purchasing a new policy. The best option for you is based on your goals and financial priorities.

Converting from term life insurance to a whole life policy means switching from a limited period of coverage to coverage that lasts your entire life. This is accomplished through a conversion rider that allows changes in your existing policy, so your policy stays with the same insurer.

In most cases, you get lifetime coverage without any new medical examination, underwriting, or detailed documentation. But before conversion, it’s a good idea to understand the differences between the two to help decide if you are making the right choice. Not all policies have a conversion feature, and some carriers limit conversion to a certain age, like 65 or 70.

Term Life vs Whole Life

If you think you might benefit from converting your term life to a whole life insurance policy, here are a few things to keep in mind:

Conversion Eligibility

To begin with, check if your term policy includes a conversion option. While most policies offer it, some don’t. If your policy is convertible, be sure to check all the applicable clauses, including when and how much you can convert. Some insurers only allow conversion up to a certain age or within a set time window. Additionally, there may be partial or full conversion of the death benefit.

Step‑by‑step Process

• Review your policy documents.
• Confirm which type of permanent policies you can convert to and what the new premium will be.
• Request and complete the appropriate paperwork from your insurance company.
• Thoroughly review the new policy offer document to understand your type of coverage, the death benefit, and cash value potential.

 Key Things to Understand

• Review details about the conversion benefit on your policy, including the age limit up to which you are eligible.
• Understand the circumstances when a medical exam may be waived.
• Know if partial or full death benefit is convertible.
• Make sure your new premium payment is within your budget.

Read: How is Life Insurance Paid Out to Beneficiaries

Converting a term policy to whole life is generally more expensive, especially if your coverage amount remains the same. Premiums with a permanent life insurance policy are higher because they offer lifetime coverage. Some key points to note are:

• Whole life premiums are higher than term premiums for the same coverage.
• The earlier you convert, the more affordable your rate may be. Switching to a whole life insurance policy when you’re older will be more expensive.
• If you have a high coverage amount with a term policy, you can also consider a partial conversion to a permanent policy to manage your premium payments and keep them affordable. For instance, you could convert your $500,000 term policy to a $100,000 whole life policy.
• Converting your existing policy is often more affordable than buying a new permanent policy, especially if your health has changed.

Here’s an example:

Benefits

• Compared to term life, a permanent policy offers lifetime coverage instead of fixed-term coverage.
• With a permanent policy you can also accumulate cash value.
• Converting your existing policy helps you avoid underwriting, making it easier for you to get lifetime coverage if health issues are a concern.

 Drawbacks

• Premiums on a permanent policy are generally higher.
• Though cash value is accessible, it can take years to accumulate a significant amount.
• You may end up paying for lifetime coverage you don’t actually need right now.

Read: How to Use Life Insurance While Alive

Converting from a term insurance to a permanent policy might be the right choice for you or not depending upon your life goals, priorities, and financial situation.

When to Consider

If by any chance you don’t want to convert your term insurance policy but still need coverage, here are a few alternatives you can consider:

• Renew or extend your term life policy for period that can meet your long-term goals.
• Buy a new permanent life insurance policy from another insurer if their rates are more favorable.
• If you want a way to save money, continue with your term policy and invest the difference in premiums through other investment strategies.
• Keep your term insurance active and purchase a smaller whole life policy with a low coverage amount to provide lifetime protection.