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Convertible Term Life Insurance

Amy Danise

A convertible life insurance policy is a term life policy that can be turned into a permanent life policy after you buy it, without “evidence of insurability.” That means you won’t have to answer health questions or take a new life insurance medical exam to convert the policy.

Types of permanent life insurance policies include whole life insurance and universal life insurance.

Why convert a term life insurance policy?

Converting a policy is an option for people who bought term life and later decide they want a policy that will pay out no matter when they die, such as whole life insurance.

The cost of the new permanent policy will usually be based on the rate class used for the original term policy (such as smoking status and health conditions) and the age at which you convert.

Life insurance riders you bought with your term life policy may also carry over to the new policy, but check with your insurer to confirm.

Is there a deadline for converting term life?

A convertible term life policy will outline the deadline for converting it. For example, a certain age might be the deadline, such as age 70. Or the deadline might be a certain number of years after you buy the term life policy, such as within 10 years.

A term life policy we examined from Principal Financial had a conversion deadline of age 70 or a certain number of years into the policy -- whichever was earlier. The years depended on the term length:

Term life policy length Last policy year for conversion
10 7
15 12
20 15
30 20

So don’t wait until the last minute if you want to convert a term life policy -- you may miss your opportunity.

What policies can I convert to?

If your term life policy is convertible, you’ll generally be able to choose any type of permanent policy that’s offered by your life insurance company.

This might even include a joint second-to-die survivorship policy, if you provide “evidence of insurability” on the second person. Second-to-die policies typically insure both a husband and wife on one policy and pay out upon the death of both.

More: Whole life vs. term life insurance

Converting only part of the policy

Some insurers will allow you to do a partial conversion, meaning part of your term life policy is converted to permanent life and the rest remains term life insurance. The two parts must still equal the original face amount of the term life policy.

For example, if you have a $1 million term life policy and convert $300,000 to whole life, the other $700,000 remains term life.

How do I get a convertible term life insurance policy?

Many term life insurance policies automatically include a conversion feature. If you’re interested in having it, tell your life insurance agent to give you quotes only for convertible term life policies. And when you get the policy paperwork, make sure the policy indeed includes a section on conversion before you buy it. A conversion feature does not add to the cost.

If you already own a term life policy, check your policy to see if it includes an option to convert.