The convertible term life coverage

Term life insurance can only go so far. It provides the coverage you need at rates you can afford. Since term life insurance is only for a certain number of years. After the term has expired, you have the option to renew the cover.

Factors that affect premium:

  • Age
  • Health and medical history
  • Occupation
  • Lifestyle

However, the drawback is that over time, as your age increases and your health condition changes (and not for the better), the premiums become more expensive.

With this kind of premium increases, the premiums may eventually be too high. Once you see that you can outlive the coverage period of the term life insurance, you may think about getting coverage that will last longer, maybe for your entire lifetime.

Some medical conditions (depending on the severity) that can result in being considered uninsurable:

  • Angina
  • Arthritis (with ongoing complications and is a longstanding condition)
  • Diabetes mellitus
  • Heart attack
  • High BMI (considered morbidly obese)
  • Severe depression where applicant has undergone inpatient treatment
  • Stroke
  • Thyroid disorder with severe complications

However, terminating the policy and starting over with a permanent life insurance cover such as whole life insurance may not be as easy. Even when you can afford the premiums, your health condition may prevent you from getting the cover that you need.

The solution? Convertible life insurance.

This type of term life insurance allows you to change your term policy into a permanent insurance policy. You can opt to convert the policy into a whole life policy, a universal life policy or a variable life policy without needing to show proof of insurability such as undergoing a medical exam.

A convertible term life insurance is ideally bought at a young age, when term life insurance is the only policy that you can afford but you want to be able to convert into to a policy with more coverage (and higher premiums) at a time when you can afford it. The term life insurance provides affordable cover at your young age. And, the converted policy is an upgrade that covers your long-term needs.

Advantages of Convertible Term Life Insurance

Here are the advantages of a convertible term life insurance policy:

This kind of policy is ideal if you are into exploring the insurance products that are available for you. However, you should also note that the there is a time limit for conversion – you need to convert before the policy expires. Also, your choice of policy to convert is limited on the products that are offered by the insurance company – you may only choose the products that the company is currently selling. Of course, the premiums will also be more expensive, as you are not availing of a permanent policy.

Other facts about policy conversions (from term life to permanent life insurance):

Updated on: 04.06.2013

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*Scottish Provident 2012 life cover claims paid report.