For most families, term life insurance coverage provides a great combination of protection and affordability. Numerous men and women locate their term life policy expires just when they no longer want the coverage — they’ve paid off their home, retired, or their children are now self-supporting.


But what if, a few years into your policy’s term, your situations change and you find out you ought to have purchased permanent life insurance coverage? Several term life policies let you to convert to a whole life policy with no taking an additional medical exam — as long as you do so inside a specific time frame or by a particular age, such as 75.


Reasons for converting


Term life insurance coverage policies spend out a death advantage if you die for the duration of the term the policy is in effect.  Whole life insurance coverage policies, on the other hand, are a kind of permanent life insurance coverage that pays out a death benefit no matter when you die. Permanent life insurance policies also construct up a “cash value” component. Even though you’re alive, you can borrow from this money reserve, even though unrepaid loans will decrease your death advantage.


In some circumstances, even even though you’ve chosen a term life policy, a complete life policy will become a lot more appropriate. A few examples:


  • Your economic circumstances improve. Numerous monetary planners suggest permanent life insurance coverage for very wealthy Americans whose heirs will be subject to estate taxes. Life insurance proceeds can be utilized to spend estate taxes. This only affects estates worth more than $ 5.4 million, according to the IRS.  You may also convert if you’d have preferred complete life insurance from the beginning but couldn’t afford it at the time.

  • Your well being changes. It’s no secret that young, wholesome folks qualify for the best life insurance coverage prices. If you’ve developed health conditions considering that you 1st bought your term life policy and consider your term will not be adequate, you might be worried that you won’t be able to acquire one more policy. If you convert to a entire life policy, you won’t have to take yet another health-related exam, even though you will pay larger premiums following you convert.

  • Your life insurance coverage wants change. For some individuals, complete life insurance coverage is a better option, like these with unique demands young children or these who own a company. A whole life policy can make certain that business partners, if you have them, have adequate income to keep operating without you. If you discover your self in one of these situations, converting will lock in your coverage.

Life insurance conversion clauses


Several term life insurance coverage policies sold these days include a conversion clause that allows you to switch to whole life but not all. So read the fine print just before you purchase.


If you don’t convert by the deadline, you’ll have to undergo a healthcare exam to qualify for a new entire life insurance coverage policy.


But if you’ve decided to convert, and you’re nevertheless eligible, contact your agent or life insurance business. You may possibly be in a position to save funds by converting just a portion of the policy’s face value.


Reviewing your life insurance every year is a great way to make sure you nonetheless have adequate coverage – and, if you do not, that you have time to alter your thoughts.


Alice Holbrook is a staff writer covering insurance and investing for NerdWallet. Stick to her on Google+.


Image through iStock.