Converting a Term Life Insurance Policy Guide
By default, a term life insurance is designed to expire after a specified amount of time, usually between 5 and 30 years. If the policy expires, you may decide that you would like to continue the coverage. To do that will require your policy to be written with a special clause, called a rider, which gives you the option of converting it to a whole life policy.
First, you will need to have the conversion option included in your policy. This rider is a clause in the policy, and may not be available from all life insurance companies. Where it is available, the rider will cost you an additional amount, either in a single payment or spread across the life of the initial policy.
As the end of the policy term approaches, contact your insurance company and notify them that you would like to take advantage of the conversion option. The insurance company will then provide you with a policy conversion form and advise you of any other steps you need to take.
You will usually have to get a medical examination. This is required because the insurance company has a right to know your medical condition and any risks it may present. Medical exams are a standard part of most whole life policies, with the exception of final expense insurance. Opting for final expense coverage may avoid the exam, but you would be paying higher premiums and receiving fewer benefits.
Converting a term policy to a whole life insurance policy will probably require you to first pay a conversion fee, which varies according to the insurance company, the length of the policy that is expiring, your current age when the policy expires, and other factors. Ask your insurance company for the specific costs of the conversion because they are subject to change from one company to another.
Be prepared to pay higher premiums for the life insurance policy after it has been converted. Not only is whole life insurance more expensive by default, but you will essentially be buying into the policy part way through the duration. The cash value of the policy will almost certainly begin at zero, so you will not be able to enjoy the savings vehicle portion of the policy for several years following the conversion.