Convertible term life insurance can be switched over to permanent coverage without requiring a medical exam or a medical history review from the policyholder.

With convertible insurance, the policyholder can change the coverage period from a fixed number of years to an endless one, so long as the payment is paid.

Find out more information about convertible term life insurance, such as how it operates and whether or not it would be a smart decision for you regarding life insurance.

Convertible Insurance: Everything You Need to Know

The policyholder's decision to convert their convertible insurance into a permanent policy will result in higher premiums yet the same amount of coverage as the original term policy. Because of the opportunity to convert without a medical exam, the premium for convertible insurance is higher than that of a term life insurance policy offering the same amount of coverage even before conversion.

Convertible insurance is preferable since the policyholder does not have to resubmit to medical underwriting when making the transition from term to permanent coverage. This is a great bonus. Convertible term policies allow policyholders to qualify for permanent policies even if their health has deteriorated since they first purchased coverage.

Maintaining the ability to change a term insurance policy into a permanent one is as simple as keeping up with the premium payments on a convertible policy.

How Convertible Term Life Insurance Works

Choosing whether to renew, convert to permanent life, or cancel convertible term insurance after its first term expires is possible. It's not always necessary to wait until the insurance expires before switching.

A term insurance's conversion period is a time frame within which the policyholder can make the switch to a permanent policy. You can transform a certain sum of your insurance into permanent protection. It depends on your policies; however, you might be permitted to do this more than once.

If you make the switch to permanent life insurance during this time, you won't need to take a medical exam to get covered. Your new life insurance premium will reflect your current age and health status as of the term policy application date (not on your current health).

There is no need for a medical test to make a move, but you should be prepared for increased rates. Permanent life insurance premiums are more expensive than term insurance because of their money-saving features and longer protection period.

Pros and Cons of Convertible Insurance

Customers who purchase convertible life insurance can upgrade to a permanent life insurance policy that better meets their needs. However, there are expenses to consider with this policy. You should weigh the pros and cons of a convertible insurance policy carefully before making a purchase.

Advantages

Compared to other life insurance types, convertible policies provide more freedom. Convertible policies allow you to switch your coverage to a different kind of permanent life insurance anytime. It's also possible to convert just a portion of your coverage while continuing with the balance of your term insurance under renewal.

The premiums for convertible life insurance are higher than those for a standard term life plan but lower than those for most permanent plans. Those who desire permanent coverage but can't afford it right now might benefit significantly from convertible insurance.

Financial advisor Sophia Jones recommends considering a policy conversion if you'd like to maximize your coverage at the lowest possible cost. The reason for this, according to Jones, is that the premiums will be far cheaper for the permanent coverage than they were for the term policy. Term insurance products only protect for a set period of time and don't build equity over time. Your premiums might be lowered, and your coverage increased by switching to permanent life insurance.

Earning premium credits on convertible insurance is possible during the course of its duration. Once you make the policy permanent, you may temporarily utilize the available credits to reduce the premium.

Last but not least, convertible insurance doesn't need a medical exam or underwriting. Finding reasonably priced permanent life insurance when you have pre-existing health conditions may be challenging. A convertible policy may be an option for you.

Disadvantages

Convertible life insurance policies may include premiums that increase over time. While looking at convertible plans, you should consider both the first premium you will pay for the insurance and the additional cost you will incur when the policy becomes active.

Occasionally, insurance companies may throw in a free conversion provision for your term life policy. Nonetheless, the premium for a convertible term life policy is often more than that of a standard term life policy.

The premiums you pay yearly for a permanent life insurance policy will be more than the ones you pay for a term policy. But, there is a possibility that you may be able to lower the cost of the new premium by taking advantage of premium credits or by changing only a portion of the coverage on your policy to permanent insurance.

Should You Have a Convertible Insurance Policy?

If you have problems securing permanent life insurance coverage but still want some, a convertible term policy may be your best bet. If you want to switch insurance plans but don't qualify for a new policy owing to your health, a conversion may be your best bet.

It may be more cost-effective to convert your term life insurance policy into a permanent one rather than let your term coverage end and buy a new one. In contrast to a new permanent policy, there will be no restrictions on who can apply.

In addition, if you decide to convert your insurance, you can choose which coverage elements to change. This may be a good alternative if you can't afford a permanent policy.

It is common for convertible plans to have a smaller death benefit than permanent policies; hence, the premiums for a converted insurance will be less expensive than those for a permanent policy.

Check out the permanent life insurance policies offered by a firm while looking for a term life insurance policy. In the case of life insurance, some companies may offer competitive term policies but less appealing permanent ones.

It's best to go with an insurer with a solid reputation for both term and permanent policies if you want a convertible plan.