Life insurance conversion options are one of the most overlooked aspects of a life insurance policy, but it is one of the most important. People apply for term life insurance normally to cover a temporary life insurance need and term insurance is the most affordable option. However, many people begin to realize life insurance is something they may want to keep later in life, or even for their whole life.
For this reason, many life insurance companies give life insurance owners the option to convert their term life insurance over to a permanent life insurance policy. This has many advantages for not only the insurance company, but also for you as the policy holder. Life insurance conversion can first seem like a complicated option, but with the help of an experienced agent it can be a very valuable option.
The option to convert your life insurance policy is often an overlooked opportunity because most people don’t know their policy offers this option, and unfortunately life insurance agents often fail to keep in touch with their clients. This causes many of these conversion opportunities to go unused which ends up hurting clients in the end.
The life insurance term conversion window is a specific duration of time during the life of a policy in which a client can “convert” their term life insurance policy into a permanent life insurance product. The first step is to make sure your specific term life insurance policy allows for conversions. The best way to determine this is to call your agent or your life insurance company and ask. Their are specific times in which this conversion can occur so it is important to find out sooner than later.
When you purchased your term life insurance it was most likely to either solve a temporary need or because of budget constraints, or a combination of both. Term life insurance is a great option for these circumstances, but it will end at a certain point and many times life insurance needs exist for someone’s entire lifetime. This is where a permanent product such as whole life or universal life comes into play. They offer protection and level premiums throughout the life of the insured. These products are more expensive than term coverage, but they certainly do come with their advantages.
One of the primary advantages of converting over to a permanent policy during the conversion period is convenience. Many life insurance carriers will allow you to convert to a permanent policy during this window without having to undergo a medical exam, or answering additional health questions.
This can be a huge advantage if you are having health issues and want to lock in a permanent policy while you still can. Some life insurance companies will also periodically issue you incentives to convert your policy during a designated window, such as reduced premiums or added cash value for your new permanent policy. This is on a carrier to carrier basis so it is important to contact your life insurance company.
Converting your term life insurance policy to a permanent policy is a relatively easy process. The first step is to get in touch with an agent or company representative for your specific carrier. If you no longer have an agent, you can contact an independent life insurance agent like us, who can most likely help you gather policy information and conversion opportunities. Each policy is a bit different, but conversion opportunities normally exist annually, or on special dates.
An agent can then communicate what conversion options exist for you. It is important to understand and decide what permanent policy you would want to convert to. The most popular options include whole life insurance and universal life insurance, but each company will have specified permanent options. Each will come with a different premium once you convert.
Once you decide on the policy you would like to convert to, then you must decide if you will be converting your entire term policy or just parts of it. For example, you may want to drop the term policy and go completely permanent. Or, you may want to keep some term in place, and have some permanent. This will solve your temporary need, and long term need.
As you can see many life insurance conversion options exist, which is why it is important to work with an experienced life insurance agent. We can make sure you understand what the result of your conversion will be, so you are left with sufficient coverage and a premium which will fit into your budget.
If you have any questions regarding your conversion options we are just a phone call away, and we are here to help.