Ordinarily there is no intention to convert term life to permanent life insurance. In fact, advisors recommend term life insurance for specific reasons. Often term life can be an affordable way to provide a financial safety net for those who rely on you for support. Term life insurance costs less than permanent life insurance because coverage is provided for a limited number of years rather than indefinitely as is permanent life insurance. It’s also cheaper because term life insurance doesn’t have the cash value or internal policy charges that many permanent life insurance policies have.
To make the best use of term life insurance, you choose the right term length. The term length should cover the most critical financial years for your family when a financial calamity could do the most damage. For example, covering you until the mortgage is paid off or your kids have made it through college.
When Things Change
If term life insurance is great when you have the goal of protecting your family while you are building family assets and your nest egg, when and why would you want to convert term life to permanent life insurance?
Let’s look at what happens when goals change.
Your life might roll out in an unexpected way. Your financial responsibilities might shift when a family member experiences a health crisis or disability.
You might later find that the term length of your life insurance policy isn’t long enough to meet your needs. You might even decide that what you really want is coverage that lasts a lifetime.
Thankfully, you don’t necessarily have to start over by buying another policy.
Term life insurance policies typically offer the option to convert term life to permanent life insurance policies.
Converting Term Insurance to Permanent Insurance
Term life insurance policies typically offer the option to convert them into permanent life insurance policies. Converting a term life policy to a permanent policy is much simpler than applying for a new policy.
First, check the language of your policy to see if conversion is an option (it is on most policies).
Next, check the term conversion period—the time frame during which you can convert. Some companies will allow policyholders to convert at any point during the term of their policy. But many will limit the conversion period. For example, the conversion period on a 20-year term policy might be limited to the first 10 years the policy is in force.
Then contact a Ziff Agency professional to convert your policy. You won’t have to take a life insurance medical exam or go through the underwriting process. In most cases you’ll simply fill out a questionnaire, and your new permanent policy will be issued within a few days. (Source: Forbes)