Term Life Conversions, Life insurance and their riders are not easy to understand. The one overlooked and most valuable is the conversion option. This rider allows an insured to exchange all or some of their term policy for a permanent policy without proof of insurability. What exactly is a term conversion and who might benefit the most?
• Term Life Conversion is a rider in which an insured can convert a percentage or all of the death benefit to a guaranteed permanent policy without proof of insurability. Converting term life to whole life or universal life can be a smart move for many, Here are a few examples.
• Who is an Ideal Candidate? If you are as healthy now as you were when you took out the policy, then you might investigate the cost of a new policy first. Anyone whose health has deteriorated would benefit from a conversion. Someone who is sick or been diagnosed with a terminal illness cannot be turned down and therefore a term life conversion would make the most sense.
• Accidental Illness Conversion Example: Just recently I helped a sick client complete a term conversion, this is just one example that touched my heart: a 9/11 firefighter survivor is sick with emphysema and COPD caused by the soot in the air following the attacks. The firefighter never smoked a day in his life, but because of the poor air quality surrounding the World Trade Center he got sick and is no longer healthy enough to qualify for life insurance. Luckily for him, he had a term policy that allowed a term life conversion. He contacted me via the web and asked if I could help him complete a term life conversion. The insurance company could not refuse his term conversion request regardless of his current health, and today he has protected his family for the rest of his life to insure leaving a legacy to those he loves the most. If you have health conditions such as diabetes and want to know if you can still qualify for affordable life insurance for diabetics, let us answer what questions you may have and help you get the coverage you deserve.
• The Only Drawback to Conversion is the Cost. Term life insurance is the most affordable type of life insurance because it only covers a period of time. The shorter the level guarantee period the less expensive. Permanent, Whole Life or Universal Life Insurance is three to seven times as much as Term Life Conversions and is the primary reason why so many own term. I like the idea of a young parent or spouse owning term with the game plan to always consider conversion when their insurance needs change. Chances are you will need less coverage which will make buying permanent more palatable. Talking with a licensed broker like myself to review options is in a consumer’s best interest.
• Term Conversions are Great for Later in Life: In a perfect world all consumers would own Term Life Conversions to protect their children and protect their liabilities ie… mortgage protection, credit card debt, and student loans while they are young. For the average consumer as they get older, debt load decreases which is an optimal time to consider completing a term conversion to make sure the insured protects their loved ones for final expenses i.e. funeral costs, burial costs, and burial insurance for yourself or your parents. No one likes the thought of losing a loved one but it is necessary that we have life insurance for ourselves and life insurance for our parents. We can certainly help this process be easier for you.
• WARNING – Group Life Insurance Conversion is NOT the Same: The one warning in regards to conversions is to not confuse group life insurance to private coverage when considering term life conversions. The conversion rights on a group plan from a work life insurance policy are not the same as a private plan. Plain and simple the group policy pricing was not based on your personal insurability therefore on the group life insurance conversion they will price the conversion based on an assumption your health is below average to protect their interests. As long as the insured is in decent health buying new life insurance will be less expensive than a group life insurance conversion. Term life conversions can be a very important part of a financial plan. Everyone will eventually need a small type of final expense type plan, but for many young people today the idea of buying permanent life insurance is a daunting task. The reality is a young consumer can buy term and consider a term life conversion later in life. For the older currently insured individuals, today might be a good day to inquire about your term life conversion options and consult with an independent broker like myself to help you price out your options.