Term Life Insurance / Convertible Term Insurance
This type of term life insurance gives you the option to convert
your policy to a permanent life insurance one at the time the term
premiums become too costly because of your age or health. You are not
required to submit medical information in order to convert the policy.
The premiums you are to pay for a convertible policy, however, are higher
than the ones for a regular term policy because of the conversion option.
In addition, convertible policies have some limitations: You can’t
exercise the conversion option if you are above certain age (usually
70) or if the term policy has been in force for a certain period.
When you exercise the conversion option you’ll be issued
a new, permanent insurance, policy. The premium for this new policy
will be higher than that for the term insurance for the same death benefit
because permanent insurance builds cash value and the attained age is
higher than the age the term policy was issued. However, the premiums
for the permanent policy will not change while the term premiums will
continue to rise on renewal.
The convertible policy is a good choice for young people, who are unable
to afford the higher cost of permanent insurance.
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