Can You Convert Term Life Insurance to Whole Life Insurance?
Buying term life insurance is an important decision that requires careful consideration. It’s important that consumers choose a policy that offers the coverage and flexibility they need. While term life insurance is generally the least expensive type of insurance, many consumers wonder what happens if they outlive their policy.
Can Term Life Insurance Be Converted to Whole Life Insurance?
In many cases, yes, term life insurance can be converted to whole life insurance. These policies are called convertible term life insurance policies. However, it is important for consumers to understand that not every term insurance policy can be converted. Before buying term life insurance, consumers need to take the time to understand all aspects of their policy, as to avoid problems in the future.
When Term Life Insurance Can Be Converted
Convertible term insurance will usually come with a specific conversion deadline. The deadline may be based on the customer’s age or set according to when the policy was issued. Before the deadline has passed, policy holders may convert some or all of their policy. For example, if a customer has a $150,000 policy, they may decide to convert $75,000 to whole life insurance. After the conversion, they may allow the rest of their term insurance to expire or decide to convert the remaining $75,000 before the conversion deadline.
How Are Rates Determined Once a Customer Has Converted Their Policy?
When converting a policy, rates are determined one of two ways. Rates will usually be determined by the customer’s current age. However, they may be determined by the customer’s age at the time of purchasing the policy. In either case, the insurance company will not ask the customer to re-qualify for their policy. Even if a customer’s health has worsened, they will still be allowed to covert their insurance.
The Benefits of Converting Term Insurance to Whole Life Insurance
While a customer’s rates will increase after converting their policy, there are many benefits of converting. Whole life insurance builds a cash value. This cash value may be borrowed against or withdrawn if the customer chooses. Customers will also be able to enjoy stable payments, instead of payments that increase as they age. When buying term life insurance, consumers will want to look for polices that give them the flexibility to convert their policy into one that continues to meet their needs.
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