One of the many options you can get with a term life policy is something called Convertible Term Insurance. This is a level term policy that has a limited time period where you can convert it to a permanent life policy. What this does is give you the financial benefit of paying a lower payment in the beginning for a term policy with the option of converting it into a type of permanent insurance for whole life protection.
You will need to meet with a qualified life insurance agent to go over the array of different convertible insurance policies that are on the market today. There are different policies that can be converted somewhere between 1 and 20 years so you can see why you will need help deciding which one will be best for your given situation.
Most of these policies have a certain amount of time they guarantee a level premium. Once that is reached they will start to rise over time. So while these have allow you to enter into a life policy at a lower premium rate they do eventually go up. You need to understand these types of policies so you don’t get caught not being prepared for the extra cost over time.
On the flip side, they are a great way to get coverage while your family or business is growing and you get to pick the time-frame of the level premium and when they start to go up. Once you are ready you can also convert these over to a perm life insurance policy and be covered for life.
Here are just a few of the highlights if you are considering a Convertible Policy.
- Guaranteed life insurance protection
- Able to upgrade to a permanent policy that builds cash value
- Possible conversion credit available in some convertible policies
- Guaranteed renewable coverage through the expiration age on contract
- Death benefit that is generally income-tax free
While there are many situations a person could use this type of coverage, here are a few that come to mind. If any of these sound like you, contact an agent who can help you learn the details so you know for sure that you are making the best decision for you and your family.
- You have a need for temporary protection for a finite period of time (1 to 20 yrs)
- Between jobs
- Cover a mortgage
- Kids finishing school
- Business loan is paid off
- Staring a new job
- Starting a new family
- Between jobs
- Sending kids to private school
- Staring a new business
- Kids out of college looking for a job
- Children or grandchildren without current coverage
- Cover outstanding loans and protect partners and shareholders from financial exposure.
Every convertible insurance policy has requirements that will need to be gone over with a trusted agent. He or she will go over the minimum and maximum face amounts of each option as well as premium modes, guarantees and risk classes you may fall into. You will also need to know the rules and regulations around the conversion options so you know exactly when you can and cannot convert the policy over to a permanent life insurance policy as well as how much of the policy is convertible and how much of a credit you will get once it is converted.
Most of these policies also allow you to attach a variety of riders to it that are developed to protect you and your family. Make sure you go over these as well in detail so understand what you have to choose from. This way you are in a great position to make a great decision for you and your family or business.