Questions – Term Life Insurance

Q: Can I convert a term policy to a permanent policy? If so, when can I do this?

Most term policies allow for conversion to permanent insurance without a medical exam. And some policies offer a conversion premium credit that reduces your first year’s premium on the permanent policy. This will make it easier to make the transition from term to permanent insurance. There might be a time limitation on the ability to convert a term policy — like up to age 70, for example.

Keep in mind that when you convert a term policy to a permanent policy, the guaranteed amount of coverage converted will not be contestable to any greater extent than it would have been had the conversion not taken place. Any excess coverage provided in the new policy beyond the guaranteed amount converted will be subject to a new contestable and suicide period.

Q: What can I convert a term policy to?

It depends. Some term policies allow conversion to any type of permanent insurance — e.g., whole life, universal life or variable universal life — while others only allow conversion to one type of insurance. And some insurance companies don’t offer all types of permanent insurance, which can limit your flexibility later.

Q. For how long are term insurance rates guaranteed?

1. The most common guarantee periods for term insurance are 10, 15, 20 and 30 years. Based on your age, some of the guarantee periods may not be available.

Q. Up to what date or age is the policy convertible?

70. Most term insurance policies are convertible to the earlier of the end of the guarantee period or age 70. This is very important to know since you may want the insurance for longer than the term period but your health could become impaired.

Q. Can term insurance be converted to other products?

1. Sometimes. There is no guarantee that these products will be available in the future, but it is important to see what options currently exist.

Q. What changes have been made to the products that can be converted to term insurance over the last few years?

1. Some insurance companies have limited the products that you can convert term insurance too. Many times the products available for conversion are not the most competitive.

Q. What are the guaranteed and projected premiums after the guaranteed period ends?

1. You should find out what the premiums will be after the guaranteed period ends if the policy is no longer convertible and your health restricts your ability to get new insurance.

Q. Are the premiums different for products outside of New York?

1. There are situations where a term policy written outside of New York could be cheaper or the guaranteed periods could be longer. Each insurance company has different rules, but to qualify, the insured or the owner must reside outside of New York.