Usually, the policyholder decides to convert his term life policy into a permanent one or extend the policy because he still needs the insurance coverage from the policy, or he may want to build the cash value that the Whole Life Insurance Policy. But do you think just the two above reasons are enough to let people make these critical decisions?
Spend only 5 minutes on reading this article to find out more thoroughly all the reasons behind the life insurance conversion:
The first reason
‘I outlived the last insurance policy, so the idea of extending it or converting a Term into Whole Life Insurance one pops up in my mind. Why do I have to pause buying the insurance service while it provides me the assurance I need?’
Term Life Insurance is the type of Life Insurance that guarantees to pay the insured coverage during a specific period. It can be 10, 20 or 30 years. People often choose Term Life Insurance because it is suitable for their tight budget.
On the contrary, if the policyholder pays the premium on time as specified in the contract, a Whole Life Insurance policy can help to protect you against the risk of death forever. In return, the policyholder is expected to pay a higher premium.
‘I still need to have funds to cover the expenses related to me, such as my own funeral expense. I do not want to bother them with these final expenses.’
‘Having the next life insurance policy is the way for me to leave an inheritance to my beloved ones after I die. I know that it cannot be as much as the inheritance from a wealthy family, however, this way of thinking gives me the peace of mind that my children can use the sum assured to achieve their dreams more easily, the sum assured paid out by the company insurance can act as a tuition fee when they join universities, or it can act as a living expense for my whole family for many years.’
You are still the breadwinner of your family; another way to say this is that your beloved ones are still relying on you financially. We know that this is not what you plan for but do not worry, this is life! ‘We can’t plan life. All we can do is be available for it.’ In this case, a life insurance conversion is a tool.
Recently, you have had some unexpected outstanding debts, so that life insurance is an excellent choice to assure that you certainly will not leave your beloved ones alone with these exceptional debts when you pass away in case the debts are not settled yet. The sum assured from the life insurance you continued will help you to protect your family!
No underwriting is required when you decide to convert term life insurance into a permanent one, except for exceptional cases. The underwriting process is the term used to describe the process in which the insurance company evaluates the life insurance applicants, from their age, health, hobbies to their financial status, to give the decision whether the applicants should be covered by the life insurance they have applied or not; if yes, how much the cost is worth. The underwriting process is generally involved with a general assessment of your lifestyle and a medical exam.
Therefore, the sixth reason is often involved with people with health problems. The ones with health problems may have to pay a costly premium when they decide to buy a new life insurance policy because it is a must that they have to go through a medical check.
However, for those still healthy, please consult your insurance broker about the price of a new whole life insurance policy to compare.
‘I want to enjoy the privileged access to cash value from the whole life insurance policy, while I cannot have this benefit when I still take part in a term policy.’
If you have read the article about Whole Life Insurance, you may know that cash value access is one of the enormous benefits of this type of insurance. With this cash value access, you can withdraw or borrow money from the cash value. You can also build savings!
The last reason
‘I have more money now so that I can afford it.’
Many people decided to opt for a 10-, 20- or 30-year Term Life Insurance at first because they had a tight budget. Permanent life insurance, including whole life policy, is much more expensive compared to a term policy. Now time flies, their financial conditions are much better, so it makes sense to convert to a more ‘luxury’ and beneficial one. The whole life insurance can guarantee the insured lifelong protection while the term life insurance policy does not.
Read more: Term Life Insurance vs. Whole Life Insurance: What’s the difference?
Things to remember
Life insurance conversion is not an easy decision that you can make immediately. Our advice is that you should take into account this privilege even before you buy the term life insurance and check with your insurance company the following criteria:
- Is this term life insurance convertible?
- When is the deadtime to convert this term life insurance into a permanent one? (Please take note carefully)
- What are all the options of permanent life insurance policy available for me to convert later?
Does any reason mentioned above for life insurance conversion match with your intention or situation at present? Comment below so that we will have a chance to support you case by case.
And do not hesitate to reach out to the trustable insurance brokers in Canada like Best Insurance Online or Life Insurance Quote for the updated insight about all Life Insurance products!
Frequently Asked Questions
What factors will impact my conversion process and the cost?
There are no fees to convert your term life to a whole life policy. Nevertheless, your premium will be increased the older you are, regardless of your health conditions. Your health condition was already locked in your original underwriting when you applied for the term life policy.
Another factor is the amount of coverage you convert. There are two conversion options: the total value of your term life plan or just a part of it. Conversion can also affect the cost, as some insurance providers have notable credits if you convert within the first few years of purchasing a package. Hence, it is worth checking with your insurance rep to see if you choose to convert early, which can help you save some money.
Finally, costs can differ regarding the type of permanent life insurance you want to convert to or are offered. For instance, sometimes, the premiums for a whole life insurance policy can be higher than that of a universal life insurance policy. But please keep in mind that some insurance companies only offer one policy type for conversion.
What should I consider when converting my policy?
Before you decide to convert your term life policy to whole life, there are some questions you should ask yourself and even your insurance broker to get sound advice from them:
– What is my goal of conversion?
– How much can I afford? Will I still be able to pay for whole life insurance premiums in my retirement?
– What permanent policies are available from my current insurance provider?
– Will I get long-term care benefits?
– Can I get a rising death benefit?
By asking these questions, you might find out that it’s not worth converting your current term life policy to a whole life one. You have several other options, such as renewing your existing term life plan or applying for whole life coverage from other insurers with much better deals after shopping around. So, be aware and informed about your choices before committing to conversion, which can be a fortune.