In addition to the value of term life’s renewability provision, these types of policies may also contain the option for converting your term life policy to a permanent plan.
The New York State Insurance Department includes this fact on their “Top 10 Questions About Life Insurance.”
Not only do you get more permanent protection but you can also do it without any evidence of insurability, explains Edward Graves, author of “McGill’s Life Insurance.”
If you want permanent insurance coverage but cannot afford the higher premiums required for cash value policies like whole life insurance, the convertible feature of term life allows you to postpone purchasing permanent insurance until a later date when it may be more ideal for your pocketbook.
“There are several situations where converting your term policy to a permanent plan is a worthwhile decision, particularly if you are just starting a family and don’t have the extra cash for a permanent policy,” says David Theile, Director in Life/Health Product Management at State Farm. “Once your needs have changed and you want and can afford more permanent protection, you can convert the policy.”
Conversions become effective at either the date of their exchange or the original date of a term contract.
Generally, your current age at the date of the exchange determines the cost of premium. Most policies with a convertible feature have age provisions that determine when you can convert the policy. But, the advantage is with conversion there is no need to take another medical exam or answer any additional questions concerning health, occupation or lifestyle.
Since convertibility promises access to permanent insurance and long-term protection, the combination of renewability and convertibility ensures total protection against loss of insurability.