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How a Convertible Term Life Insurance Policy Works?

Term life insurance is a policy for a specific amount of time that can be converted into permanent life insurance without typically going through the insurer’s underwriting process again. Depending on your situation and coverage needs, this type of plan may be well worth the investment. Let’s take a closer look at term life insurance that can be converted and some key features it offers.

What is convertible term life insurance?

Convertible term life insurance is a type of policy that lets you convert to permanent life insurance once your coverage expires. When you first apply for term life insurance, you’ll have a policy that can last for 10, 20, or 30 years, as long as you continue paying your premiums. If you find that you still need life insurance toward the end of your policy’s term, you can convert your term life insurance to a permanent plan, such as whole life insurance, with no new medical exam or underwriting process. With convertible term life insurance, you can enjoy coverage for the rest of your life, and don’t have to worry about your policy expiring.1

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Convertible term life insurance features

The most noteworthy features of a term life insurance policy that can be converted:

Death benefit

With convertible term life insurance, you can eventually switch to a policy that is not for a term limit and can last your entire life. But even if you die during the initial term, your beneficiaries will receive the death benefit once they file a claim.

Conversion period

The conversion period refers to when you can convert your policy to permanent life insurance. While this varies by insurer, it’s usually before the term ends or before you turn 70, whichever comes sooner.1

Multiple policies to convert to

If you have convertible term life insurance, you can typically choose to convert to any type of permanent policy your life insurance company offers, such as whole life or universal life insurance.1

Full vs. partial conversion options

When it comes to convertible term life insurance, some life insurance companies allow partial conversions. If you opt for a partial conversion, part of your term life policy will be converted to a permanent life policy, such as whole life insurance, and the rest will remain term life insurance. For example, if you have an $800,000 policy and convert $300,000 to whole life insurance, the other $500,000 will remain term life coverage. You can also choose to convert all $800,000 to a whole life policy, which is a full conversion.

Benefits of convertible term life insurance

Here are several key advantages of converting term life insurance:

Flexible timeline

Many convertible term life policies let you choose when you want to convert from term life to permanent life insurance. You can do this any time before the conversion period comes to an end.1

No new medical exam needed

When you convert a term life policy, insurers won’t require a new medical exam. If your health has declined since you first took it out, this can be a huge plus.2

Level premiums

The premiums you’ll pay will be determined at the start of your convertible term life policy. While convertible term life insurance is active, your premiums will remain the same. But keep in mind that once you convert your policy to whole life insurance or other type of permanent policy, premiums will increase.1

Lifelong coverage

Convertible term life insurance offers the chance to extend your coverage for the rest of your life. This may better suit your needs if your circumstances change over time.

Is convertible term life insurance a good idea?

You might want to explore convertible term life insurance in these situations:

You have long-term dependents

Do you have aging parents you’re providing for or a child with a disability? If so, you may need coverage beyond your policy’s initial term.1

You have several large debts

If you have debts, like a mortgage payments and car loan, and don’t believe you’ll pay them off before your initial term expires, it might make sense to convert to permanent life insurance.1 By doing so, you can help protect your loved ones from a hefty debt burden.

You don’t want to risk being disqualified from coverage later in life

As you age and your health declines, life insurance becomes more expensive and difficult to get. If you choose a convertible term life policy, you may not have to worry about taking a new medical exam to qualify for coverage.2

Alternatives to convertible term life insurance

Several alternative options to a convertible term life policy include:

Level term life insurance

With level term life insurance, you may enjoy level premiums for your policy’s entire term. Your beneficiaries will be owed the same payout regardless of whether you pass away during year one or the last year your policy is active.

Renewable term life insurance

Renewable term life insurance allows you to decide if you still need coverage at the end of your term. If so, you may continue to renew your coverage up to a certain age, such as age 70.3

Decreasing term life insurance

A decreasing term life plan is a type of term life insurance with a death benefit that gets smaller over time. This type of policy is usually tied to a specific loan or debt that you’re gradually paying off.

Aflac offers term and whole life insurance

If you’d like the flexibility of being able to change your term life insurance to a permanent life policy when your policy expires, converting a term life policy should be on your radar. This can allow you to switch to lifelong coverage, such as whole life insurance, as your long-term needs change.

Aflac is pleased to offer term life insurance with premiums that stay the same throughout the duration of the policy. With our term life policy, you can get something that fits your budget with enhanced coverage tailored to your needs. We also offer whole life insurance plans with reasonable premiums and coverage that lasts a lifetime. Contact an Aflac agent today for more information and get a quote.

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