Conversion Option financial definition of Conversion Option

Conversion option, Don’t know where to start?

A term life conversion option lets you turn your expiring insurance policy into one that can last as long as you do.

The Term Life Insurance Conversion Option – A Good Option to Have

Because whole life coverage is usually much more expensive than term life coverage, using a conversion option might not seem like a good idea at first. However, whole life policies have features that can make them valuable parts of your overall financial plan.

Term Insurance Basics Term life policies are relatively straightforward. They last for a set period, called the term.

conversion option

As long as you pay your premiums, the insurer will pay your beneficiary if you die during that time. Once the term expires, your life insurance ends.

ARM Conversion Option

For example, if you buy a year term policy when you're 30, your life will be covered until you're After the expiration of your policy, you either go without insurance or you buy a new policy. The problem is that the older you get, the more likely you are to die, so the more expensive your new policy would be.

Although the risk of dying between 45 and 60 is relatively low, it's still higher than the risk between 30 and Term Life Conversion Options Term life policies frequently come with conversion options.

conversion option

These let you change your term life policy into a whole life policy conversion option contacting your insurance company and paying the difference. With this option you don't have to go through an application or qualification process -- the fact that you qualified for the term policy is enough.

Conversion Option

Some policies even give you an initial credit for some of the premiums you paid on your term policy, which helps defray the cost of the conversion. Benefits of Converting The key benefit of taking your option and converting your term policy to a whole life policy is that your coverage won't automatically end as you age.

Another benefit is that you usually bring your health rating with you, so you can convert to whole life even conversion option you've become sick.

conversion option

Whole life insurance has broader investment benefits as well. Many policies contain a savings element through which the policy itself can build up value. The death benefit from your insurance policy is tax-free, so a whole life policy can help pay taxes conversion option your estate if you leave a sizable sum to your heirs.

Life Insurance Medical Free Conversion Option | Explained

Drawbacks to Converting The key drawback to converting your term life policy to a permanent one is the cost. Premiums vary based on many factors.

The monthly premium on her whole life policy would be almost as much as the yearly premium for the term policy. Another drawback to converting is that you might have too much term coverage.

The Term Life Insurance Conversion Option

Term policies that you take out when you're young typically cover your relatively high expenses, such a mortgage and the cost of keeping your children in school. As you age you're likely to pay your mortgage down, to build up savings and to watch your children become self-sufficient. At that point you need less insurance to cover your loved ones.

One way to balance this is to do a partial conversion, if your insurer allows it.