If you first bought your life insurance policy when you were young and just starting a family, chances are that you opted for term life insurance. Many young couples chose this plan because it’s cheap, simple, and you know it’ll cover your children while they’re young and living at home.
But is it still the best fit for you?
What happens if you let the term life insurance expire while you still need it? Now you’re completely without any life insurance protection, and it may not be easy, affordable or even possible to get another plan.
So let’s talk about why converting your term to permanent life insurance could be a smart move.
When to convert term to permanent life insurance
A lot can change in a decade or two.
Maybe your kid is still living in your basement. Maybe you had kids later in life. Maybe you adopted your nephew or your granddaughter. Maybe you just want to be able to draw upon your life insurance while you’re living in order to supplement your retirement so you want a policy with some cash value.
Or maybe your health has changed so you are now uninsurable. You know that once your current policy expires, no company would take on the risk of your health condition.
Whatever the reason, don’t just walk away from your plan, and don’t let it expire before you figure out your next step. If you do, it might be too late.
Anyone who still has dependents definitely doesn’t want to let their term life insurance expire. You want to make sure they will be financially cared for if you were to die suddenly. They rely on you for financial support, so converting term to permanent life insurance guarantees there will be money left behind for them, giving them the care they need and you peace of mind.
Another reason to upgrade term to permanent life insurance is when you have a higher or steadier income. A lot of people simply can’t afford the higher premiums when they’re younger. Once you’re better established, you can afford the plan you wanted all along.
How to convert your term to permanent life insurance policy
Many people don’t realize that you can actually convert your term policy into permanent insurance. The catch is that you have to convert it during the lifetime of the term policy.
That’s right: many companies allow you to convert your term to permanent insurance. This will ensure your loved ones are protected into the future.
As long as you are insured by a reputable company, we should be able to work out a way to convert your term insurance into one that’s a better fit for your current circumstances. Not all policies allow for this, but many of them do.
Avoiding the medical exam
One of the best parts of converting your policy is avoiding medical scrutiny. When you upgrade during the lifetime of the existing term policy, you usually don’t need a medical exam to make this switch.
This is especially important for older folks or people who may have developed a chronic health condition like diabetes or disease. For many people, if they wait until their old policy expires, the required medical exam will disqualify them from any policy.
Underwriters for insurance companies have access to extensive health records and will pinpoint health conditions even if you don’t report them. If your health has declined in any way, you may be denied a new policy. You were already approved years ago for your current term life insurance, but that doesn’t mean they have to approve you again.
Even if you’re healthy, your age alone could stand in the way of you getting approved if you were to have to apply again now.
The way around that is to convert your current term life insurance policy to a permanent policy. Since you are already approved for your current plan, you wouldn’t have to go through the whole approval process again.
But you would have to start all over again if you let it expire. And then, life insurance companies may jump at the chance to deny you a new policy.
Don’t let that happen to you!
While your premium will increase after converting your policy, many policies are still affordable — especially when you consider the peace of mind gained from ensuring ongoing protection for your loved ones.
What do you convert it to? There are lots of plans to choose from, but the basics are universal, whole life, or permanent. To understand the differences, read my blog on the types of life insurance.
Additional benefits of permanent life insurance
Obviously the biggest benefit of converting a term to permanent life insurance policy is that it never expires, so your beneficiaries are guaranteed to receive a payout when you die.
One of the great benefits of permanent (or universal) life insurance is its cash value. The cash value is the money that you paid into the policy or earned through interest growth over time. Most plans allow you to withdraw from that growing sum, up to a certain limit.
The funds you withdraw can be used right now, while you’re still alive. They can apply to personal expenses or in an emergency. They can provide extra monthly income during your retirement.
You’ve always wanted to travel to Europe but never go to go? Take out a few thousand from your permanent life insurance plan and live it up while you still can!
Do you need just a little something more to get by for the next few months? Permanent life insurance to the rescue! Whatever the reason, when you have that “cash value,” you also have the freedom to do with it what you want.
If you’re worried about your term policy expiring, I’d love to sit down with you to figure out which is the best option for you and your current life situation. Book a time with me to start your path to financial security today!
