Provides peace of mind that your loved ones will be financially taken care of when you die. The two main types of life insurance are term and whole life.
Policies are in force for a predetermined period of time – typically, from one to 30 years. You make payments every month during that term, and if you die before the policy expires, your beneficiaries will receive a single-figure, tax-free payout known as the death benefit.
Once the policy expires, you can usually extend your current term, get a new policy or convert your policy to a whole life policy. If you die after the policy expires, yourDo not get death benefit.
, by comparison, is a type of permanent policy, which means coverage lasts for your lifetime. As a result it tends to be more expensive than term life insurance. You make payments on such policies under your death.
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Can you convert term life insurance to whole life insurance?
The short answer is yes.
You can convert most term life insurance policies into permanent life insurance policies with whole life insurance. You can determine if your policy — or a policy you’re considering — allows conversion by looking for a conversion provision in the policy document. You may need to purchase a sound converterThere are options for this.
Reasons for Converting Term Life Insurance to Whole Life Insurance
When you buy a term life insurance policy, you make assumptions. For example, you might consider how long your children will depend on you for financial support. You choose a term you believe will provide the coverage you need for as long as you need it.
But life has a way of deviating from our plans. When your term ends you realize you want to continue coverage. You can get a brand new term life policy, but it’s much easier to convert your term policy to a whole life one. Also, whole life policies allow you to build savings, while term policies do not.
Here are five reasons you may want to convert your coverage after your term life insurance policy expires.
1. Your health has changed
When you apply for a new life insurance policy, you may have to endure aTo determine how much risk you will be insuring. If you’re considered too risky, the provider may require a higher premium or deny you coverage altogether.
A new medical exam is not required to convert your policy. If your health deteriorates since you took out your term policy, it can save you money on premium payments or ensure you get coverage at all.
2. You still have dependents
You may want to continue providing financial support to dependents for many reasons. Maybe your child is still in college or you’ve started providing for a sick loved one. In such cases, converting your term life insurance policy to a whole life policy can guarantee that you will be able to take care of these dependents as long as needed.
3. You want to leave a legacy
Life insurance can help you provide for your children and grandchildren. They can use their death benefit for anything they want, from education to living expenses. For this reason, life insurance is often considered an option.
4. You want to cover funeral expenses
When you die, your loved ones will already be dealing with a lot of things, from grieving to planning your funeral. A whole life insurance policy can take some of the stress out of your life by providing funds for end-of-life expenses such as cremation or burial.
5. You want to build your savings
Does not create a term policy. You make your monthly payment, and once the term is up, that’s it. Unless you have a premium return policy (which can be expensive), you won’t get that money back.
With whole life insurance, you build guaranteed cash value that is tax-free. You can use this cash value to pay for things like outstanding debt, unexpected medical expenses or retirement. You may have to pay a fee to do this, but it can still be a better strategy than other financing options, such as taking out high-interest credit card debt.
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How to Convert Term Life Insurance to Whole Life Insurance
To convert your term life insurance policy to a whole, review your policy documents to make sure it includes a conversion provision. Next, find out if there is a transition period. Some life insurance providers allow you to convert a term policy into a whole at any time during the term. Others only allow conversion within a certain number of years (such as the first 10 years of the term).
Once you know this information, contact your insurance provider to ask for a conversion. You can convert a part or the entire amount of your policy value. The more you convert, the higher your premium will be for a whole life policy.
There is no fee to convert your term policy to a whole life policy, but your premium may increase because older policyholders are riskier to insure. If you have a term life insurance policy and still need coverage after the term expires, it is worth considering converting it to a whole life insurance policy.
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