How to Convert Your Term Life Insurance Policy at the End of Term
Term life insurance provides death benefit protection for a certain time period – usually 10, 15, 20, 25 or 30 years. The amount of term insurance can vary greatly from $100,000 of coverage to several million dollars of protection. Term insurance is the most straightforward and least expensive life insurance and has one purpose – the death benefit. Many people replace their term policies with new coverage before the end of the term, or they do a term life insurance conversion.
What happens when my term life insurance ends?
Let’s say you have a 10 year term life policy, and it has reached the end of the 10 years. If you do not make another premium payment, then your coverage will cease.
If you want to continue coverage after the term ends, you have the option to continue the policy by paying out-of-term premiums. These premiums will increase every year, and eventually become cost prohibitive. The other options are to replace your policy before the term ends, or use a term conversion.
What is a term life insurance conversion?
Most insurance companies allow a term conversion up to age 65 or 70, depending on the company. A term conversion is the process of converting your policy into permanent insurance without a medical exam or underwriting. There is a short application to complete, and the conversion can usually be completed in 2- 3 weeks. A term conversion is a way to keep your coverage in-force, if you come down with a serious medical condition, and cannot qualify for a new insurance policy. The converted policy can usually be designed for any duration of time and any $ amount of coverage, up to the face amount of the old policy. You can convert your policy at any time during the term. The premiums for a life insurance conversion depend on your age, so the sooner you convert your policy, the less expensive it will be.
Pros of a Term Life Insurance Conversion:
- Guaranteed approval of continuing life insurance coverage, regardless of any medical issues that arise.
- Premiums may be guaranteed not to increase for the life of the policy.
- The duration and $ amount of policy are flexible to meet your needs and budget.
Cons of a Term Life Insurance Conversion:
- Premiums will increase substantially compared to the term premium.
- Premiums may be higher than taking out a new policy, depending on age and health of the insured.
For those individuals who have a change in health during their term or do not want to go through the approval process for new life insurance coverage, a term conversion can be a great option. If you would like to see if your current term policy can be converted, please complete this form and fax or email to us. We will be happy to research the policy and explain your options for a term life insurance conversion or new coverage.