Term life insurance can be converted to permanent life insurance

Oct 06, 2011

If policyholders want something more secure than term life insurance, their policy can be converted to a permanent life insurance policy.

Term life insurance policies have many benefits including lower initial premiums and a high death benefit. But over time, premiums can begin to increase or death benefits can start to decline. Often, it can make sense to convert a term life insurance policy into a permanant life insurance policy that provides security and predictable premium payments in the future.

In a piece for Delmarva Now, Chip Gordy, a financial adviser, recently identified some points to consider before converting a term life insurance policy into a permanent policy. While a permanent policy's cash value can be borrowed against to help with expenses such as retirement or college tuitions, the loans can reduce the death benefit and cash value of the policy and the loan interest may be charged on the amount borrowed.

According to Gordy, when converting to a permanent policy, however, there may be no requirement for a medical or financial re-qualification that would be needed if the consumer bought a whole new policy. The conversion can give policyholders a sense of security and protection knowing their death benefits are guaranteed and the premiums can build on a tax-deferred basis, he said.

In honor of National Life Insurance Awareness Month, personal financial representative Dustin Jarrard recently offered some other life insurance tips for potential customers. Jarrard said consumers should start by determining how much life insurance they need based on current income, living expenses and future financial obligations. Then he recommends comparing the options and benefits of both permanent and term life insurance to see which type best fits the consumer's current situation and needs.  

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