term life insurance

Term to Perm

The heading “TERM TO PERM” refers to whether one should purchase term life insurance or permanent life insurance. 

Ideally, you want to buy life insurance that at the end of the period, if the insured is still alive, will return all premiums paid, such as Return of Premium life insurance. Or, you want to buy Whole Life Insurance, which builds value and at some point in the future the cash value of your policy will equal or exceed the premiums you have paid. These two types of policies cost more than Term Life Insurance.

However, if you cannot afford permanent life insurance, then you need to consider Term Life Insurance. The one topic this article addresses is that when selecting term life insurance, you need to be aware that, among other factors affecting your decision,  there is a “BASIC type of Term Life Insurance that offers only life insurance protection for a set time period, such as 10, 20, 30 years, and that in some limited cases may be convertible to just one type of a permanent life policy of the same insurance company issuing the term policy.

Then there is a “PLUS” type term life policy that allows the holder to convert to any of the permanent, or whole life, policies of the policy issuer. The PLUS policy costs more but the applicant should consider whether it is worth to pay a few extra bucks in order to get a product with a more extensive conversion option.

And why should the convertible product be considered? On conversion the new premium is calculated on the applicant’s age at the time of conversion, but, and this is important, at the original underwriting class. This means that if the applicant was PREFERRED BEST initially, the conversion is calculated using the same Health Category of PREFERRED BEST, regardless of the health situation of the applicant at the time of conversion.

In addition, there are policies that will apply a conversion credit when policyholders  convert their term life insurance policies. In some cases the conversion credit is the entire cumulative premium for the first 3 or 5 years of the policy.

If you are interested to explore converting an existing term policy to a permanent policy, or would like to evaluate obtaining a term policy with conversion options, please, give us a call at our Toll Free Number (888) 950-8376, or click on Contact Us, forward your request and one of our licensed agent will contact you ASAP!

 

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