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Term Life Insurance: Convertible & Renewable Features

Instructor: Ian Lord

Ian is a real estate investor, MBA, former health professions educator, and Air Force veteran.

In this lesson, we'll explore how convertible and renewable features included with some term life insurance policies offer risk management solutions for people who may be worried about their ability to get insurance later in the future.

Convertible and Renewable Features

There is no such thing as a one size fits all life insurance policy. Steve knows that depending on his client's individual needs, certain features might be worth including in a policy selection. These extra features come at an extra cost above a basic term life insurance policy, but the additional benefits may be worth it to meet the client's requirements to manage risk. Life insurance buyers may not need or have the funds for a long-term policy, but want to be prepared to still have insurance in place in the event of a health decline or some other situation where they become uninsurable. Two common term life insurance features that can be included for an extra cost are convertible and renewable policies. Let's review the benefits these features offer to life insurance buyers.

Convertible Policy

One of the issues with a term policy is that it may be very difficult to get insurance when the term is up if there is a decline in the health of the insured. A convertible policy eliminates this issue because it has a provision that allows the insured to convert a term policy into a whole life insurance policy. The key factor is that exchanging the term policy for a whole life insurance policy does not require underwriting or a physical exam. Underwriters will consider various factors, and if necessary, change the premiums to reflect the client's age and health factors such as weight. Since whole life policies cost more than term policies, the premiums will rise. However, if the client is concerned about one day becoming uninsurable, then a convertible policy option would help mitigate that risk.

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