Why Buy a Convertible Term Life Insurance Policy?

One of the most difficult decisions consumers face when buying life insurance is whether to opt for term or whole life coverage. On the one hand, term life gives policyholders large amounts of protection at very affordable premiums. On the other hand, whole life policies provide a lifetime of coverage with rates that never increase. For the best of both worlds, consider a convertible term life insurance policy. Read on to find out how convertible term life can give you both the flexibility and affordability you need.

What Is Convertible Term Life?

Convertible term life is a term life insurance policy that gives the insured the option to convert to whole life coverage at any point without penalty. Most term life insurance policies offer a conversion option to allow policyholders to adjust their coverage as their circumstances change. With convertible term coverage, young and healthy policyholders can take advantage of the low premiums of a term policy until they can afford a whole life policy for more comprehensive coverage. A whole life policy can later give the insured the stable coverage he/she needs for a maturing family.

No Medical Exams

If you decide to convert your term life coverage to a whole life policy, you can do so without have to submit to a medical exam. In other words, no underwriting is necessary when the policy is converted. You simply inform your insurer of your desire to convert your policy, and the switch is made. If you applied for a whole life policy without convertible term life insurance, you would have to take a life insurance medical exam. Even minor health problems could then disqualify you from receiving coverage, but with convertible life insurance, you can make the switch without this hassle.

Savings and Cash Value Accumulation

A convertible term life policy can help you save on your premiums in two ways. First, you begin your coverage with term life premiums, which are typically the cheapest available. Secondly, once you switch to whole life coverage, your premiums will never increase again. Regardless of your age or any changes in your health condition, your premiums will remain the same once you switch to whole life. You can avoid costly premium increases in this way.

Although a convertible term life policy will not accumulate cash value initially, it will begin building value as soon as you switch to whole life coverage. If you convert your policy fairly early in life, you can potentially enjoy decades of cash value accumulation. With a traditional term policy, your policy would provide face-value-only coverage, meaning the policy would have no cash value once it expired.