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Is there a right time to convert term life to whole life insurance?

You may be aware that it is sometimes possible to convert a term life insurance policy to a whole life policy. Is the switch worth it? And if so, when is the best time to convert? Here are some things to consider.
December 29, 2023
3 min read
Learn when to convert a term life policy to whole life insurance.

Can you convert your current term life policy to whole life?

Many people who carry life insurance have a term life plan. These plans typically offer coverage over a period of 10, 20 or 30 years. This may be long enough to pay off a mortgage or to protect dependent children as they grow up.

However, if you don’t die during the period that you have term life insurance, the policy expires, and the money may never come back to you or your family.

Fortunately, the majority of term life policies offer “riders” that allow you to convert your term life policy to a whole life policy if you wish. You can check whether you have this option by reading through your policy or talking to your insurance company.

The question is, if you have the option, should you make the change?


Benefits of making the switch

Converting a term life policy to a whole life policy has certain benefits. The first is that your insurance policy will last until the end of your life as long as you pay premiums. This means that your loved ones are likely to receive some kind of payout when you pass away no matter how long you live. So, you may be able to help pay for the long-term care of a spouse or child after your death, which is why many people choose this option.

Most whole life policies also have a cash value that builds very slowly and can be a source of financial help in emergencies. In addition, you may be able to use the IRS Section 1035 exchange to trade in a whole life policy for an annuity, which pays you a regular, fixed payment while you are still alive. 

Most importantly, converting a policy from term to whole life is often possible even if your health has worsened. In some cases, converting your policy may mean you don’t have to apply for a new policy or go through a medical exam or underwriting.


The right time to convert from term life to whole life

If you are interested in converting your term life policy to a whole life policy, you may want to review your current policy right away. Policies typically allow you to convert only after you have paid into a policy a certain number of years. It’s also common for policies to allow conversions only until the policy holder reaches a certain age, usually 65 or 70.

Finally, you want to consider whether you are at the right point in your life financially to convert. This is because the premiums for whole life insurance are often more expensive than those for term life.


Is converting to whole life insurance worth it?

Converting to whole life insurance may not be beneficial to people who are not in a stable position financially. If you’re unable to pay the more expensive premiums, you could lose your coverage totally, including any cash value you built up. One option may be to convert just part of your term life coverage to whole life. This saves you money on premiums but reduces your death benefit.

In some cases, especially where your health is still good, simply buying another term life insurance plan might be a cheaper solution. However, if you have a serious health condition that would make a new life insurance policy difficult or nearly impossible to get, converting your term life policy to whole life just might be your best bet.

Here’s one last thing to consider: As we mentioned above, a whole life policy is designed to remain in force no matter how long you live, so it can be one way to help make sure you leave a financial gift to loved ones. If that’s important to you, you might want to look into converting to whole life.

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