Convert Your Term Policy Before It Expires
While term insurance is a great way to protect your family from financial disaster, sitting on the same policy until it is too late to replace it with a permanent options can be a financial disaster.
Term life is temporary insurance. It pays a fixed death benefit if the policy holder passes away during a set period of time. For example, if you have a 20-year term policy and you die before the 20 years end, your beneficiaries will receive the face value of your policy.
Once the 20 years is up, the contract expires. The company keeps your premiums and you have to find new insurance, usually at a higher premium. Term insurance helps you to prepare for the unexpected.
Term insurance is the cheapest form of life insurance because it is temporary and not intended to pay out. Young families benefit from term insurance. In many cases, it is taken out to help support young children and a spouse in case the primary breadwinner passes away. That takes a large policy to accomplish.
But as families mature, the breadwinners grow older and the policies get closer to expiration. Situations change and families need to consider changing their term insurance into a more permanent option.
Many term insurance contracts have a clause that allows the policy holder to do just that.
You could think of it as leasing insurance with an option to buy. You can use the convertibility clause to convert without having to obtain a new insurance policy. For a price, families can transform their temporary insurance into permanent insurance without having to re-apply for coverage or have medical examinations.
Not all policies have conversion clauses. If you are buying term insurance, look for policies that include the clause. They are often more expensive, but well worth it.