Term Conversion

Core Takeaways

• Term conversion is the process of changing a term life policy to permanent life insurance.
• It typically doesn’t require a medical exam.
• Conversion must happen during the conversion period (usually first 10-20 years).
• Premiums increase to permanent life rates based on your current age.

What is Term Conversion?

In plain English: Term conversion is like upgrading from a rental apartment to a house. You start with temporary coverage (term), but later you can switch to permanent coverage (whole life) without having to re-qualify.

How Term Conversion Works

Here’s a step-by-step guide to the term conversion process:

1. Review your policy to confirm it has conversion privileges
2. Check the conversion period (usually the first 10-20 years)
3. Decide what type of permanent policy you want to convert to
4. Contact your insurance company to start the conversion
5. Complete the conversion paperwork (no medical exam needed)
6. Start paying the new permanent life insurance premiums

Step	What You Do	Important Notes
1	Review policy	Not all term policies are convertible
2	Check conversion period	Typically 10-20 years from issue date
3	Choose permanent type	Whole life, universal life, etc.
4	Contact insurer	Start the conversion process
5	Complete paperwork	No medical exam required
6	Pay new premiums	Higher than term premiums

Why Convert Your Term Policy?

• Health Changed — You developed a health condition that would make getting new coverage difficult
• Longer Coverage — You need coverage beyond the term period
• Cash Value — You want to build cash value
• Estate Planning — You need permanent coverage for estate planning

Important: I always tell my clients to consider conversion before their health changes. Once you’re diagnosed with a serious condition, it’s too late—you’ve missed the opportunity to lock in permanent coverage at your original health rating. I used our life insurance calculator with a client last year, and we determined conversion made sense for her before she turned 50.

Types of Permanent Coverage to Convert To

When converting, you’ll typically have these options:

• Whole Life: Fixed premiums, guaranteed cash value growth
• Universal Life: Flexible premiums, adjustable death benefit
• Indexed Universal Life: Cash value linked to market indices
• Variable Life: Cash value invested in subaccounts

Pros and Cons of Term Conversion

Pros

• No medical exam required
• Lock in coverage regardless of health changes
• Build cash value
• Permanent coverage

Cons

• Higher premiums than term life
• Conversion period is limited
• Permanent life is more expensive

Authoritative Sources

For more information on term conversion, visit these trusted resources:

• Insurance Information Institute (III)
• National Association of Insurance Commissioners (NAIC)
• U.S. Securities and Exchange Commission (SEC)

Frequently Asked Questions

Can any term policy be converted?

No, not all term policies are convertible. You need to check your policy documents or contact your insurance company to confirm.

Do I need a medical exam to convert?

No, the conversion is based on your original health status when you purchased the term policy. This is the primary benefit of term conversion.

How long do I have to convert my policy?

The conversion period varies by policy but is typically the first 10-20 years of the term. After that, you can’t convert without a medical exam.

Will my premiums increase after conversion?

Yes, permanent life insurance premiums are significantly higher than term life premiums. The new premium will be based on your current age and the type of permanent policy you choose.