Can I convert my term life insurance to whole life insurance?
Key takeaways
- Many term life policies let you switch to permanent coverage, like whole life or universal life, without undergoing a medical exam.
- Your conversion window won’t stay open forever, so grab your policy or call your insurer to check the details and deadlines before it’s too late.
- Some policies include a conversion option right off the bat, while others require you to add a rider — double-check what your policy offers to avoid surprises.
- Converting means lifelong coverage and perks like cash value, but it also comes with higher premiums, so think about your budget and long-term goals before making the move.
If your term life insurance is nearing its end, you might be wondering what comes next. Here’s some good news. Many term policies come with a hidden benefit called a conversion option (or term conversion rider), and it’s usually included at no extra cost. This powerful feature lets you turn part — or all — of your term policy into permanent coverage, like whole or universal life insurance, without having to prove you’re still insurable. That means no medical exams, no health questions, just a seamless way to keep your family protected.
But don’t wait too long. Every conversion option has an expiration date, which can depend on your age, the policy’s term length and the insurer’s rules. If your policy is nearing its end, now could be the time to explore your options.
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Whole life insurance combines life insurance with an investment component.
- Coverage for life
- Tax-deferred savings benefit if premiums are paid
- 3 variations of permanent insurance: whole life, universal life and variable life include investment component
Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time.
- Fixed premium over term
- No savings benefits
- Outliving policy or policy cancellation results in no money back
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Term vs. whole life insurance
With term life insurance, the policyholder chooses a period during which their policy is active — usually somewhere between 10 and 30 years. The policyholder pays premiums until the end of the term. If they die within the policy term, their beneficiaries receive the death benefit. If not, the policyholder is left without coverage when the term ends.
Whole life insurance, on the other hand, is a permanent policy typically providing coverage up to age 95 to 121, as long as you pay your premiums. With whole life insurance, you pay a fixed premium. Over time, the policy can accrue cash value, which is money that is accessible to you while you’re still alive.
What happens at the end of a life insurance term?
Reaching the end of your term life insurance might feel like closing a chapter — your coverage provided security during the years you needed it most. But when the term is up, the policy typically expires unless you’ve taken steps to extend or convert it beforehand. At this point, the financial protection you counted on will no longer be active.
For example, if your policy ends on January 15, 2025, and you were to pass away on January 25, 2025, without renewing or converting the policy, there wouldn’t be a payout for your loved ones. This is why it’s important to plan ahead. Options like converting your term policy into permanent coverage or renewing for another term (if available) can keep that safety net in place for the years ahead if needed.
Can I convert term life insurance to whole life insurance?
Yes, in many cases, you can convert your term life insurance into permanent coverage, such as whole life insurance. This option, often included in term policies, allows you to extend your life coverage without starting over or worrying about new medical exams. However, not all policies offer whole life as a conversion option — some may only offer universal life policies to switch to. To know exactly what’s available to you, it’s best to review your policy documents or reach out to your insurer for clarification.
If your policy includes a conversion option, you’ll find it detailed in something called a term conversion rider. Think of this as your policy’s fine print for making the leap from temporary to permanent coverage. But don’t wait too long — many conversion windows close before the term ends. The real advantage to all of this is that you shouldn’t have to undergo a medical exam, which means your health status at the time of conversion doesn’t affect your new policy’s rates.
If you’re in the market for a term life policy, asking about conversion options upfront is a smart move. Having this feature gives you flexibility as your life evolves, whether that’s planning for lifelong coverage or simply keeping your future options open. Life is unpredictable, and a built-in safety net like this can offer a little extra peace of mind.
How does a term conversion work?
If you have term life insurance and you feel like your coverage is coming to an end too soon, a term conversion might be just what you need. It lets you turn part or all of your term coverage into a permanent policy, like whole life or universal life insurance, without having to go through another medical exam. That means any changes to your health or lifestyle since you bought your original policy won’t affect your eligibility or the cost of your new coverage.
However, permanent life insurance is pricier than term because it offers lifelong protection and, in many cases, the potential to build cash value over time. Plus, your new premiums will reflect your age at the time you convert — after all, you’re older now than when you first signed up. But as we mentioned, premiums will only be impacted by age and not any new health issues that you might have developed over the years you’ve owned your term policy.
If you don’t want to convert the entire policy, that’s fine, too. Many insurers let you convert just part of your coverage, though there’s usually a minimum amount that has to stay in place for the term policy. For example, if you have a $500,000 term policy and your insurer requires a minimum of $250,000, you could convert half into permanent coverage while keeping the other half as term. This creates two separate policies: a smaller term policy with reduced premiums and a new permanent policy with its own pricing.
With a little planning, a term conversion can help you extend your coverage in a way that works for your life today and tomorrow.
How to convert term life insurance to whole life insurance
Knowing how to convert term coverage to whole life insurance may help you if you decide you still want coverage after outliving your term life insurance policy. Here are the steps you could take to convert your policy, but specific steps may vary based on your company and policy.
- Determine whether your term policy includes the option to convert—and whether you are still ahead of your policy’s stated conversion deadline.
- Talk to your insurance company about what types of permanent life insurance are available and the conversion cost.
- Fill out a life insurance conversion application.
- Choose the amount of life insurance you’d like in the conversion.
- Choose how you’d like to be billed for premiums (annual, quarterly or monthly).
- Enter bank account information if you’re setting up automatic withdrawals.
- Assign beneficiaries.
- Sign and submit the application.
Pros and cons of converting term to whole life insurance
Converting your term life insurance into a whole life policy can open up new possibilities for long-term coverage, but it’s not a one-size-fits-all solution. Here’s a closer look at the upsides and the potential challenges to help you decide if it’s the right move for you.
Pros of converting your policy
- Lifetime coverage: One of the biggest perks of converting is skipping the medical exam. It doesn’t matter if your health has changed since you first bought your term policy—you can lock in lifelong protection (typically up to a coverage age of 95 to 121) without the stress of proving you’re still insurable.
- Hassle-free process: No lengthy forms, no needles, no waiting for approval. The conversion process is as straightforward as it gets, so you can focus on what matters most, ensuring your family’s future.
- Save on “starting over” costs: Because your premiums are partially based on your original rate class, converting may cost less than applying for a brand-new whole life policy later in life. However, your age at conversion does still impact your new policy’s premium.
- Cash value with a purpose: Whole life insurance builds cash value over time, giving you a financial cushion. Need to cover an emergency, fund a big expense or even boost your retirement income? That cash value could come in handy.
Cons of converting your policy
- Sticker shock is real: Whole life insurance is more expensive than term and sometimes significantly so. Before converting, take a close look at your budget to make sure the higher premiums fit into your financial plan.
- Not every option is on the table: Some insurers have limitations on what type of permanent policy they have available for conversion. If you had your heart set on a specific type of permanent policy, double-check what’s available to you.
- Multiple policy management: If you convert part of your term policy, you’ll end up managing two separate policies. A smaller term policy and a new permanent one, each with its own premium and details to track.
- Coverage limits may apply: Insurers often set minimums for how much coverage must remain on your term policy after a partial conversion. This could limit how much of your term coverage you’re able to convert.
When to consider converting your term policy to whole life
Life is anything but a linear path, and sometimes what worked perfectly a few years ago no longer fits today. If you’re realizing your term policy is nearing its end, and you’re looking to extend protection, converting to whole life insurance might be the right next step. Here’s a closer look at situations where it could make sense.
Your budget is more stable
When you bought your term policy, affordability might have been the deciding factor. Maybe you were just starting your career, juggling new expenses or saving for your first home. But now, if you have more financial wiggle room, converting to whole life could bring the security you are looking for. Sure, the premiums are higher, but they come with benefits like lifetime coverage and the chance to build cash value.
Your health isn’t what it used to be
You’re now a few years older, and maybe your health isn’t quite as stellar as it was when you first signed up for life insurance. Applying for a new policy now could mean jumping through hoops — medical exams, questionnaires, the works. A term conversion lets you skip all of that. No matter how your health has changed, you can lock in permanent coverage without worrying about disqualifications or higher rates due to new health risks.
Your family’s future is still on your shoulders
If you’re the go-to person for your family’s financial stability, whole life insurance can give you the reassurance that they’ll be cared for long after your term policy ends. From covering everyday living expenses to saving for big milestones — like college or kids’ weddings — this type of coverage helps make sure your support doesn’t stop, even if you’re no longer there to provide it.
You want to take care of final expenses
Even if you don’t have dependents, converting to whole life can be a smart way to cover end-of-life costs. The stress of managing funeral expenses, medical bills or lingering obligations can be extremely overwhelming. A smaller whole life policy can help take that weight off their shoulders during an already challenging time.
Debt won’t magically disappear
Got a mortgage, auto loan or a pile of credit card balances? Those responsibilities don’t vanish if something happens to you. Converting to whole life ensures there’s a death benefit in place to handle those financial loose ends, giving your family a clean slate instead of unexpected bills.
You like the idea of a policy that multitasks
Not only does it provide a death benefit, but it also builds cash value over time and has the potential to pay out dividends. The cash value component can act as a financial safety net — you can borrow against it, use it to cover premiums or save it for future needs. Just keep in mind that dipping into the cash value may reduce the death benefit unless it’s repaid.
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