Term Life Insurance Conversion -(Everything You Need to Know About Conversion Periods)

What is a term life insurance conversion period?

A term life insurance conversion allows you to trade your term policy for a universal or whole life policy.

Most (but not all) term life insurance policies have the option to convert it to permanent coverage with no further medical underwriting.

And while that is an excellent feature of term policies, you need to know the pros and cons of term conversions.

At RiskQuoter, we give you the information you need to make an informed decision about your conversion options.

How a Term Life Insurance Conversion Works

A term life insurance conversion is relatively simple because there is no medical underwriting.

Every life insurance conversion needs the following:

  1. Existing Policy Information
  2. Conversion Illustrations
  3. Conversion Application

But don’t worry; we’ll help you put this altogether even if we weren’t your original insurance agent.

Existing Policy Information

The first step is to get the following on the existing term life insurance policy.

  1. Policy Number
  2. Policy Date
  3. Conversion Period
  4. Your Original Underwriting Health Class
  5. The Coverage Amount

We use the above information to determine which products are available for conversion.

With the current policy information, we can work on conversion illustrations for you.

Conversion Illustrations

Did you know that there are almost endless possibilities when illustrating a universal life or whole life insurance policy?

It’s true, and it can be challenging to understand the 10-30 page illustrations that insurance companies provide.

You have to make choices about premium payments, death benefits, policy withdrawals, and riders.

That’s where we can be helpful to you.

Once we know your objective with the conversion, we can provide the illustrations that best fit your needs.

We have access to the illustration systems for the best life insurance companies.

Illustration Options

As mentioned, options are endless, but we’ll guide you through this.

Premium Payment Choices Include:

  • Pay premiums every year until death
  • Limited years – Pay until age 65 or pay for ten years
  • Specified Premium – Pay “x” amount
  • Skip Years – Paying a premium, skipping a year, resuming payments

Death Benefit Choices Include:

  • Full conversion of the term policy
  • Partial conversion of the term policy
  • Guaranteed Death Benefits
  • Non-Guaranteed Death Benefits
  • Increased Death Benefit (may require underwriting on the increase)
  • Endowment Death Benefit
  • Zero cash at 100 Death Benefit

Policy Withdrawals and Riders:

Suppose you are looking to use your policy to provide supplemental retirement benefits in the future. 

In that case, the policy can be designed to provide you with a tax-deferred income using policy loans and withdrawals during retirement.

You can also choose life insurance riders for your conversion policy.

Conversion Application

Once you’ve chosen your option, you sign the related illustration and conversion application to submit to the home office.

The home office takes 10-14 business days to complete the process and issue the new policy.

If you are doing a partial conversion, the home office will address this with a new policy for the conversion and a change letter for the reduced term policy.

In some cases, we can get the conversion done quickly if there is a conversion deadline or premium due soon.

When Should You Consider a Term Life Insurance Conversion?

In our experience, most term life insurance conversions happen when the insured develops a significant health issue or is looking to sell their policy for a life settlement.

The conversion privilege allows you to have lifetime coverage that you won’t outlive.

And because you don’t have to qualify medically with a conversion, it’s a simple process.

That’s especially helpful if you would have ended up with a table rating or flat extra due to a health condition.

Suppose you are selling your policy for a life settlement. In that case, we can help you get the correct illustration as settlement companies have specific guidelines they want to see illustrated.

Pros and Cons of Life Insurance Conversions

Before converting your life insurance policy, consider these pros and cons.

Life Insurance Conversion Pros

  • No medical underwriting required – You won’t get declined!
  • No paramedical exams.
  • Premiums are based on your health when you bought the initial policy
  • Lifetime coverage is available
  • You may be able to add helpful riders
  • A convertible policy allows you to sell the policy
  • You may be able to convert a portion of your policy

Depending on your individual needs, it may make sense to look at a new policy vs. converting your existing policy.

Life Insurance Conversion Cons

  • Your premium increases substantially for the whole or universal life policy.
  • Premiums are based on your current age
  • Some companies limit the conversion products available.
  • Conversion choices may decrease with older policies.

We’ll tell you what types of life insurance are available for conversion.

Final Words

A life insurance conversion can be a great way to keep your life insurance policy.

Contact us to explore your options if you are considering a term life insurance conversion.

We’ll explain each type of available product and show you comparisons so you can make an informed decision.

Thank you for your time. We look forward to hearing from you.

We’d love to chat.

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