Term life insurance is a popular choice for many young adults due to lower premiums. It also makes for a sensible coverage option during your most vulnerable years, such as when you have dependents and a mortgage.
If you’ve decided you’re looking for lifetime coverage, you might be wondering how life insurance policies work. In some cases, you can convert your current term policy to a whole life insurance policy, but you may also need to consider buying a new policy.
Considerations When Converting Your Policy
While there are typically no fees associated with converting your policy, you’ll likely have an increase of cost in your monthly premiums. There are several factors behind this.
To start, whole life insurance has an added cash value. A portion of your monthly premium will go to this cash value and build over time. With a whole life insurance policy, your rates are locked in for life.
Another consideration is how much of the death benefit you can convert. Keep in mind that a whole life policy insures you for life, so it makes sense that whole life insurance with the same death benefit as term life insurance can cost a bit more. Determine how much of a death benefit you need when making the switch to keep the cost down. You don’t have to convert your entire death benefit to a new policy; consider keeping some in your current policy to reduce cost while maintaining the coverage you need at this time.
How to Convert to a Whole Life Insurance Policy
Converting your current policy vs. purchasing a new one has several advantages. You don’t have to undergo another life insurance exam or hassle with the underwriting process again. The underwriting class you were previously assigned may stay the same, even with changes to your health.
The first step is to determine if your current policy can be converted. Keep in mind that while most policies have a conversion clause, some may not. Look for a conversion clause on your policy to see if you are eligible. If you can’t find one, call your life insurance agent for assistance.
Once you have determined that your policy can be converted, you’ll want to check the conversion period. The conversion period is the amount of time you have to convert the policy. Let’s say you have a 10 year term policy; you may only be able to convert this policy within the first five years. This time frame varies by company and policy, so you’ll want to verify your eligibility.
Now that you have determined that your policy is eligible for conversion, you’ll need to reach out to your insurance agent to request the change. You may be asked to fill out a questionnaire before issuing the new policy. In as little as a few days, your new policy will be issued.
Reasons to Convert to a Whole Life Policy
Term life insurance may have been the more practical choice when you originally purchased your policy. Monthly premiums are typically lower, making it a more attractive option for younger adults. Below are a few reasons you may be considering a different type of life insurance policy.
You can afford it now: It’s no secret that whole life insurance usually costs more than term life. It’s designed to cover the insured for life; it never expires as long as premiums are paid on time. Your annual income has probably increased since you purchased your current policy, making whole life insurance more accessible to you.
You want to leave a legacy for your loved ones: When you bought your term life insurance policy, you were likely trying to protect your family in case something happened to you. Now your kids are likely financially independent with children of their own, but you would still like to leave something behind for them. If you choose whole life insurance, you won’t have to worry about outliving your policy and you can ensure that those you love will be provided for.
You want to cover end-of-life expenses: If you do not already have money set aside for your burial expenses and other end-of-life costs, a whole life insurance policy can guarantee just that.
You want the added cash value: Whole life insurance has a cash value. As mentioned previously, a portion of your premiums goes to this cash value, which grows over time. You can borrow against these funds later with a much lower interest rate than a typical bank loan.
How Americo Senior Life Can Help
Americo Senior Life helps seniors obtain affordable whole life insurance. If you aren’t happy with your policy, you may return the policy and cancel within 30 days for a full refund of premium paid. Your rates are locked in for life, and your policy never expires as long as premiums are paid on time. Go online and request a free quote for your lifetime protection.