Life insurance plays an important role in protecting your loved ones financially in case something happens to you. One of the most popular types of life insurance is term life insurance, which offers coverage for a specific period, such as 10, 20, or 30 years. It’s affordable, straightforward, and ideal for people who want coverage during their working years. But what happens when your term is about to end?
That’s where term conversion comes in. If your policy includes a term conversion option, you may be able to switch your temporary coverage into permanent life insurance without taking a new medical exam. This simple option can be a valuable feature—especially if your health has changed over time.
In this article, we’ll explain what term conversion is, how it works, and why it can be a smart move for certain policyholders.
What Is Term Life Insurance?
Before we get into term conversion, let’s quickly review what term life insurance is.
Term life insurance is a policy that provides coverage for a limited period (or “term”). If the insured person dies during the term, their beneficiaries receive a death benefit. If the term ends and the policyholder is still alive, there is no payout, and the coverage ends—unless it’s renewed or converted.
Because it’s temporary and doesn’t build cash value, term life insurance is typically more affordable than permanent life insurance.
What Does Term Conversion Mean?
Term conversion is a feature that allows you to convert your existing term life insurance policy into a permanent life insurance policy, such as whole life or universal life, without undergoing a medical exam or providing evidence of insurability.
In simple terms:
You’re upgrading your temporary policy into a lifelong one—without proving that your health is still good.
This can be a major advantage if your health has declined since you bought the term policy. It gives you the option to continue coverage for the rest of your life, rather than letting it expire.
Why Is Term Conversion Useful?
The main benefit of term conversion is continued coverage without a new medical exam. Here are some reasons why this feature is so valuable:
1. Health Changes Over Time
When you first bought your term policy, you may have been in excellent health. But over the years, your health could have declined due to age, illness, or other factors. If you try to buy a new life insurance policy, you may face higher premiums or even be denied coverage. Term conversion lets you lock in coverage regardless of your current health.
2. Extended Financial Responsibilities
Maybe you thought you’d only need coverage for 20 years, but now your family still depends on your income, or you have outstanding debts. Converting your term policy to a permanent one gives you the option to keep protecting your loved ones.
3. Estate Planning and Final Expenses
Permanent life insurance can also be a useful tool for estate planning, helping to cover estate taxes, funeral costs, or leave a legacy for heirs. Converting your term policy ensures you’ll have lifelong coverage to handle these needs.
When Can You Convert a Term Policy?
Most insurance companies allow you to convert your term policy during a specific window of time. This may be:
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Any time during the term
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Within the first 10 or 15 years
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Before a certain age (usually between 65 and 75)
It’s important to check your policy documents or talk to your insurance agent to find out your specific conversion deadline.
If you wait too long, you might lose the opportunity to convert and would have to apply for a new policy—with a medical exam.
What Types of Policies Can You Convert Into?
This depends on the insurance company, but most allow conversion to some form of permanent life insurance, such as:
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Whole life insurance: Offers lifelong coverage with a guaranteed death benefit and cash value.
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Universal life insurance: Provides flexible premiums and death benefits, and also builds cash value.
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Variable universal life (in some cases): Includes investment options, though it carries more risk.
The premiums for the new permanent policy will be higher than your term policy—but the cost is based on your age at the time of conversion, not your health.
How Much Coverage Can Be Converted?
In most cases, you can convert some or all of your term policy’s face value. For example, if you have a $500,000 term life policy, you may choose to convert $200,000 of it into permanent life insurance and let the rest expire at the end of the term.
This flexibility allows you to adjust your coverage based on your current financial situation, needs, or budget.
How to Convert a Term Policy
The process is usually straightforward:
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Review your policy to see if it includes a conversion option and when the deadline is.
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Contact your insurance provider or agent and express your interest in converting.
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Choose the type and amount of permanent coverage you want.
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Complete any required forms. No medical exam is required, but you may need to submit paperwork.
Once approved, your new permanent policy will begin, and your old term policy (or the portion you’re converting) will end.
Pros of Term Conversion
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No medical exam required
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Guaranteed acceptance into permanent coverage
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Continued life insurance protection after the term ends
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Option to convert partial amounts
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Great for people with new or ongoing health issues
Cons of Term Conversion
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Higher premiums for permanent insurance
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Not available with all term policies or from all companies
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Must be done within a limited time frame
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May not be necessary if you don’t need lifelong coverage
Tips for Making the Most of Term Conversion
Start early: Don’t wait until the end of your term to consider converting. Planning ahead gives you more time to explore your options.
Convert only what you need: If full permanent coverage is too expensive, consider converting a portion of your policy to keep some coverage in place.
Compare policies: If your insurer offers multiple types of permanent life insurance, compare their features, costs, and benefits.
Talk to a licensed agent: A professional can help you understand your options, calculate costs, and decide what’s best for your financial goals.
Is Term Conversion Right for You?
Term conversion is a smart option if:
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You still need coverage after your term ends
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Your health has declined and you can’t qualify for a new policy
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You want to use life insurance for estate planning or long-term needs
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You can afford higher premiums for permanent insurance
However, if your financial responsibilities have decreased, or you’ve built enough savings to self-insure, you may not need to convert your term policy.
Term conversion in life insurance is a valuable feature that gives you the flexibility to adapt your coverage as your life changes. It allows you to extend your protection without going through a medical exam or losing your insurability—even if your health has worsened.