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Should I convert my Term Life Insurance to Permanent Life Insurance?

February 15, 2021

The decision as to whether or not to convert from a term policy to a permanent life insurance policy is very fact-specific and dependent upon the family circumstances.

There have been circumstances where term policies were taken for a temporary reason. It may have been because children were younger, or for a business purpose such as a buy/sell policy. However, as the term marches on, or sometimes comes close to expiration, the importance of those temporary reasons varies extremely. For example, if one has a child or spouse who is dependent on the insured and their earning capacity (such as a special needs situation or a nonworking spouse), there might be a need for financial security well after the term would have expired. In this situation, it does make sense to consider a conversion. However, many circumstances must be considered. In addition to the need, the financial means to pay for the insurance is a huge factor. Will the insured or the owner have the capacity to continue paying premiums on a permanent policy, which are generally higher than a term policy. What other insurances are available? What is the health situation of the insured-they qualify for a new policy today?

It is recommended that you do not wait until the end of the term or close to the end of the term to convert a policy if you have already recognized the need for permanent insurance. The insured health circumstance is unpredictable, as it might give rise to an increased premium, or even a lack of insurability, which is a high risk to take. However, if you choose not to convert your policies, you may elect to self-insure. This usually means allocating certain savings for potential future needs. The decision of whether or not to let a term policy expire should be made proactively. It is a factor in one’s financial plan just like any other financial consideration.

Feel free to contact us If you need help deciding whether or not you should convert a term life policy into a whole life, universal life, or other types of life insurance policy”


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Recent Posts
Immediate vs. Deferred Annuities

Despite not being as well known as some other retirement tools, annuities account for 6.5% ...

See more
According to Young Investors, Progress Toward Goals Matters Most

Younger and older investors are likely to have different preferences in music, movies, and fashion. ...

See more
Guiding Your Aging Parents Through Life’s Next Chapter: A Strategic Overview

In today’s aging society, many families face the responsibility of caring for elderly parents. This ...

See more