Can term life insurance be converted to whole life? In many cases, yes – we’ll explain what you need to know, and when this might be a good idea. If you’re still shopping for a term policy and want the chance to convert, make sure you tell your agent. If you already have a term policy and aren’t sure if it includes a conversion option, your agent can look this information up for you.
First, let’s take a look at the differences between the two policy types:
Term life is the simplest and most affordable type of coverage. You select a term length for your coverage, and a death benefit amount. The life insurance company sets a price for your coverage based on your age, health, and lifestyle. That price is locked in for the length of your term, no matter whether that’s 5, 10, 20, 30, or 40 years. When your term ends, so does your coverage. Depending on your insurer, you may have the option to convert your policy to a permanent whole life policy. Also depending on your insurer, you may have the option to renew your term policy on an annual basis, with the price increasing sharply with each renewal. To learn more, check out our post on what happens to term life insurance if you don’t die.
Whole life covers you for your entire life. Unlike term life, it doesn’t expire. It also comes with a cash value component – an account attached to your policy that fills up over time with portions of your payments as well as interest paid by your insurance company. That cash value grows tax-deferred over time. Later, you can borrow against it with a policy loan from your insurer, or you can make a partial withdrawal. You only owe income tax on any cash withdrawn that is over the amount you’ve already paid into the policy. To learn more, check out our post on using whole life to create wealth.
When people ask, “Can term life insurance be converted to whole life,” they’re generally looking for the two main benefits whole life provides: lifelong coverage and cash value growth. If that’s what you’re looking for, conversion may be a good option for you. Next, we’ll go over how the conversion process works.
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If your term policy includes a conversion option, yes. The catch? That conversion option must be in place when you buy the policy; it’s not something you can add on later. Many insurers offer this option, but you’ll need to check your policy documents to be sure.
If your policy is convertible, you would need to notify your insurer that you’re interested in making the conversion. You may also have the option to convert some but not all of your term policy, so you’ll need to know how much you want to convert, if that’s an option for you. The insurer can give you several quotes to see how much a partial versus total conversion might cost.
One important change to be aware of: your monthly payments will increase, so ask the insurer what the new rate would be. The good news? You won’t have to take a medical exam to convert your policy. The cost will increase, as we mentioned, both because you’re older now than when you bought the policy, as well as because whole life costs more than term life. However, the insurer cannot raise your rates any further if you’ve developed health issues in the meantime.
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Here are some of the reasons why you might want to convert your term policy into something that lasts for your entire life:
Can term life insurance be converted to whole life? That depends on your policy – let us help you figure it out! Call us at (800) 521-7873 and we’ll go over all your options with you.Get a Free Quote Now
Before you make the decision to convert, here are a few things to think about:
Can term life insurance be converted to whole life? That depends on your exact policy – but is that the right decision for you and your family? We can help you figure it out. Call us at (800) 521-7873 and we’ll go over all your options with you. Or click the button below to get a quote for a new term life policy and see if it might be less expensive to go that route.Get a Free Quote Now