What Is Convertible Term Life Insurance?

Convertible Term Life Insurance Explained

Convertible term is a form of life insurance that allows you to exchange it for permanent life insurance without going through the insurance company’s underwriting process.
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Convertible term is a form of life insurance that allows you to exchange it for permanent life insurance without going through the insurance company’s underwriting process. 

Learn more about convertible term life insurance, including how it works and whether it might be a good life insurance choice for you.

Definition and Examples of Convertible Term Life Insurance

Life insurance policies take two basic forms, either term insurance or permanent life insurance. Permanent life insurance is designed to last a lifetime, no matter how long you live. Term policies are designed to last only a certain number of years, usually anywhere from 5 to 30 years or more. All policies are usually a variation of these two types. 

One of these variations is convertible term life insurance, which lets you convert your term insurance policy to a permanent life policy without a medical exam or health assessment. 


Permanent life insurance, unlike term insurance, has a cash value account that helps offset the costs of insurance as you age. However, you may be able to access money in the account via withdrawals or policy loans.

The main advantage of convertible term life insurance is that you can purchase a temporary life insurance policy, which costs less than a permanent one but leave the option open to convert to a permanent policy at a later date. Plus, you don’t have to go through the underwriting process—health questions and possibly a medical exam. Your premium for the permanent policy is based on the information you supplied when you applied for the term policy and your current age.

Convertible term coverage may be ideal for young families who eventually want the peace of mind of permanent life insurance, but can’t immediately afford the premiums. Keep in mind that premium rates will rise if the policy is converted to a permanent one.

For example, let’s say you have young children and need life insurance, but you can’t afford the higher payments of permanent life insurance. So you buy a 20-year term policy with a conversion clause. Four years later, you earn more money and you can afford permanent life insurance, so you convert your term policy to a permanent one. 

How Convertible Term Life Insurance Works

As the term of a convertible term policy ends, you may have the option to renew, convert to permanent life, or drop the coverage. But you don’t have to wait for the policy to end to convert it, and in some cases, you shouldn’t. 


Insurance companies may limit when you can convert your term life policy, such as only allowing conversion during the first 10 years of the policy or no later than your 65th birthday.

If you want to convert, you’re required to do it during the conversion period, whose length depends on the type of term policy you have. You can also choose to convert a portion of the policy to permanent coverage. You may be able to do this multiple times or just one, check your policy documents for details. 

You won’t take a medical examination if you convert to permanent life within this period and you’ll be approved for coverage. The premium rate for your new life policy is based on your age on the conversion date and on your health when you applied for the term policy (not on your current health). 

Though you can make this switch without taking a medical exam, you should still expect higher premiums. The higher premiums you pay for permanent life insurance (relative to term coverage) reflect the additional cost of building up cash value and the extended length of coverage. 

Do I Need Convertible Term Life Insurance?

Your reasons for having life insurance may change over time. Convertible term life insurance lets you start with a less expensive policy while giving you the option to switch to permanent life insurance without a medical exam when your finances and insurance needs change. 

You may want to consider a convertible term insurance policy in several circumstances.

You Want Permanent Coverage But Can’t Afford It

If you’d like to have a permanent insurance policy, but just can’t afford one right now, getting a term policy with a conversion option allows you to lock in a rate based on your current health. As your financial situation improves, you can convert some or all of the term coverage to permanent. 

You Have Outstanding Debt

Term life insurance protects your dependents from financial hardships if you pass away when your policy is still active, and having term coverage allows you to put more money towards paying down your debt (relative to having a more expensive permanent policy). But what if when your policy expires you still have outstanding debt? With convertible term life insurance you can switch to permanent life insurance, so that your dependents continue to be protected no matter when you die.

You Have Dependents

If you have dependents, you probably need life insurance. But having dependents can be an expensive proposition and a term policy may be all you can afford. Instead of waiting until your finances improve to get permanent coverage, a term policy can provide the coverage you need now at a price you can handle. 

If you have a lifelong dependent—say a special needs child—a permanent policy is ideal. But if you can’t afford one or can’t afford the amount of coverage you need with a permanent policy, then convertible term coverage may be your second best bet. In this way, you can get the life insurance you need at a price you can afford and convert it to permanent coverage when you’re in a financial position to do so.

Key Takeaways

  • A convertible term policy lets you convert your term policy to a permanent life insurance policy.
  • You won’t be required to take a medical exam or answer questions about your health if you convert term life insurance (with a conversion clause) to permanent coverage.
  • If you want to switch to permanent life insurance, you must do it within your term policy’s conversion period.
  • Converting from term to permanent life insurance will result in higher premiums.
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  1. Pacific Life Insurance Term. "Pacific Elite Term." Accessed Nov. 12, 2021.

  2. Texas Department of Insurance. "Life Insurance Guide." Accessed Nov. 12, 2021.

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