Term life insurance offers a more affordable option than permanent life insurance for anyone looking to protect their loved ones against unexpected financial expenses upon their death. Read our guide on what is term life insurance to understand how it works, who it’s for, and how to get it.
Term life insurance is a type of life insurance coverage that expires after a certain length of time or a “term.” It is also known as “term assurance” or “pure life insurance.” Until its expiration date, the policy guarantees payment to a beneficiary (or beneficiaries) if the insured dies.
The pros and cons of converting term life insurance
With term life insurance, you and your family are protected for the length of the policy — which usually ranges between 5 and 30 years. But after the term is up, so is your coverage.
That expiration may be fine with you if it happens after your financial obligations to your family are complete. But converting the policy to permanent allows you to pass along a death benefit to your survivors regardless of when you die. And to do so without the complications of getting a brand-new policy — like fresh medical issues.
Decide how much benefit to convert
You can convert up to the amount of the term policy’s death benefit, but that doesn’t mean you should necessarily move the full amount to a new policy. The more you convert, after all, the higher your premiums for the converted policy.
Many convertible policies permit partial conversions, which could make the conversion more affordable. If, for instance, you had a $500,000 term policy, you could do a partial conversion into a permanent policy with a $100,000 death benefit.
Increasing the death benefit probably won’t be an option for the converted policy. You generally can’t convert a term policy into a permanent policy with a higher value, even if you’re willing to pay the premiums to do so.
Is Term Life Insurance Right for You?
If you’re getting married, starting a family, or buying a house, you should be considering some type of life insurance. And your policy should be in effect as long as your family will depend on your income. Term life insurance is an excellent option for those with dependents but not a lot of disposable income to invest in a permanent life insurance policy.
Fresno Financial Planner Takeaways
When it comes to Fresno retirement planning Soutas Financial puts your future first. Don’t forget these great reminders: Term life insurance is a type of life insurance coverage that expires after a certain length of time or a “term.” It is also known as “term assurance” or “pure life insurance.” With term life insurance, you and your family are protected for the length of the policy — which usually ranges between 5 and 30 years. Increasing the death benefit probably won’t be an option for the converted policy. You generally can’t convert a term policy into a permanent policy with a higher value, even if you’re willing to pay the premiums to do so.
via Converting Your Term Life Insurance: Here’s When Switching to Whole Life Makes Sense
