As you experience different life stages, your life insurance needs will inevitably change. When you purchased your term life insurance policy, you made a good move. One that helped you protect those who matter most to you or a business you’ve worked hard to build. But what happens to a term life insurance policy when it expires? You have several options to consider based on what fits your needs now and in the future.
Most term life insurance policies will allow you to convert your existing policy to a whole life insurance policy, turning your temporary coverage into permanent coverage.
What Options Are Available for Conversion?
Permanent Life Insurance
You can convert your eligible term life policy to most permanent life insurance policies such as whole or universal life. These policies won’t expire and covers you for a lifetime so long as premiums are kept current.
If you’re not ready to convert your entire term policy, some companies allow partial conversions. This means you take part of your term policy and convert it to a permanent policy. You would then have two separate policies: one term and one permanent. This option is often used when you may not be able to afford to convert the full policy amount, but you’d still like to have some permanent coverage.
Why Convert to a Permanent Policy?
Term life insurance is designed to provide temporary coverage for a specific amount of time — 10, 15, 20 or 30 years. This coverage provides protection during the term, but once the time is up, your term policy will either expire or your premium could increase significantly.
Unlike a term policy, permanent life insurance policies build a cash value over time. You will generally be able to access your life insurance cash value through a policy loan or withdrawal for emergencies, supplemental retirement income and more.
When you convert your term policy, generally you won’t have to go through the underwriting process again. Which means no medical exams are required. Additionally, you may be eligible for a premium credit. The credit lowers the premium amount you’d pay on your permanent coverage in the first year.
It won’t cost you to convert your term policy to a permanent coverage option, but it is important to note that permanent life insurance typically costs more than term.
Get the Right Fit
Life insurance is an important element of your overall financial well-being. Don’t let your term life policy expire without a plan. Your local Farm Bureau agent can explain the value of permanent insurance, how much coverage you may need and the process to convert your existing term policy. You may even qualify for a conversion credit for making the transition. Your credit would be applied to the first year’s premium of your new permanent life insurance policy.