Is Convertible Term Life Insurance Worth It? Well, ‘Convertible Term Life Insurance’ is the most searched topic on the internet. And then one question comes to mind, why? Well because of this option, you can get more opportunities to choose another life insurance or extend the term of your insurance. Our life is full of hidden treasures and opportunities, and we have to grab them by taking full advantage of Convertible Life Insurance.
Before knowing all the details about Convertible Life Insurance, we have to know its definition first…
Many organizations have many definitions of this life insurance, because of its importance. So, I am sharing some organizational definitions to gain clear knowledge about it. As a part of term life insurance,” Convertible Term Life insurance” allows the policyholder to change a term policy into a whole or universal policy.
According to INVESTOPEDIA,“A convertible insurance policy is a type of temporary term life insurance that can be turned into permanent life insurance that will not expire.” (www.investopedia.com)
According to” ZURICH”,“Convertible term life insurance is like term life insurance but with an additional benefit to the policyholder who has the option to convert the policy into a new policy for a longer time.”( www.zurich.ie)
Example (How Convertible Term Life Insurance Worth It)
For example, if you have a $500,000 term policy, you could convert $250,000 and keep the $250,000 term insurance. Combining term and permanent insurance can make sense if, say, you want extra protection until your kids graduate from college but want to focus on other financial needs afterward. (https://www.prudential.com)
Why Is Term Insurance Convertible?
Convertibility is the biggest option for a policyholder. Convertibility gives the policyholder an option to convert to permanent coverage. After that, you don’t need to provide evidence of insurability or any medical exam.
Should One Convert A Term Policy To A Permanent One?
It fully depends on one’s situation and financial goals. If you can afford the higher premiums then you can convert your insurance. The reasons for which you can choose this coverage are given below-
Coverage until you die:
Permanent life insurance has the “Death Benefit” facilities. It means that if you maintain the policy and die you will get the full benefit of permanent insurance. Other hand, if you outlive the given time in policy, the death benefit goes away.
A set cost:
Usually, life insurance gets more expensive as you get older/your health changes. So, once a person passes a certain age, the cost can become prohibitive. Converting to a permanent policy can help to” lock in” coverage and cost.
The chance to build cash value:
Permanent policies can build up money inside them. If you borrow or withdraw money from the policy, that will reduce the amount of beneficiaries.
If you don’t touch the cash value, it could help the policy to increase the amount of beneficiaries that you will get.
Is Convertible Term Life Insurance More Expensive?
Convertible term life insurance costs more than term life insurance. Because we know that, this insurance has extra benefits. The main reason for additional costs is the fact that you can cover the future in a new policy for a long period.
What Is A 10-year Convertible Term Life Insurance?
In a life insurance policy, a 10-year term policy will last for 10 years. If it is a convertible term policy, then you have the option to convert your policy to any other permanent policy. And that policy will remain active as long as you keep paying your premiums.
What Happens If I Outlive My Term Life Insurance?
Once your term life policy ends, you can not convert your policy to a permanent one. You can not ” cash “ it out, because there is accrued cash value.
Normally speaking, either you have to buy another policy at a high cost or you have to go without life insurance.
However-
If your policy has a guaranteed renewal clause, then of course you can renew your policy on a year-by-year basis, but it will cost a very high rate.
Most of the time policyholders search online to find out the best insurance policy which is most taken by the common people. They searched online, which one is most searched on the internet. After doing a primary investigation on the internet, policyholders choose a representative from life insurance to know the pros and cons of life insurance, and which one is best suitable for them.
After all the calculative sessions, generally, people choose ‘CONVERTIBLE LIFE INSURANCE’ as the best option to jump to another option.