What Is Convertible Term Life Insurance?

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Convertible term life insurance is a type of policy that lets a policyholder exchange their term life insurance for permanent life insurance during a certain period of time without having to answer health questions or undergo a medical exam.

Key Takeaways

  • A term life insurance policy often lets you switch your term policy to a permanent life insurance policy, as long as the policy contains a conversion clause.
  • If your term life insurance policy allows a conversion, you may have a limited window of time to make the switch.
  • When you exchange a term life insurance policy for a permanent life insurance policy, you’re not required to undergo a medical exam or answer questions about your health.
  • Premiums typically go up when you convert from term life insurance to permanent life insurance, partly because you’re getting coverage that lasts longer.

How Does Convertible Term Life Insurance Work?

Convertible term life insurance is a type of term policy you can convert to a permanent life insurance policy (such as whole life or universal life) without needing to undergo a medical exam or fill out a health questionnaire. This can be especially valuable for someone whose health has worsened after they purchased a term policy. Convertible policies are only available for term life insurance.

Once your policy converts, the premiums will jump because you’ll be paying for permanent life insurance, which can cost six to 10 times more than term life insurance. That’s because permanent insurance builds cash value and covers you for life, while term life insurance only covers you for a specified number of years.

The conversion is usually allowed during a certain eligibility period, such as 10 years or before age 70. The eligibility period varies from insurer to insurer, but it won’t last forever.


You may be able to convert some or all of a term life policy, and you may be able to do the conversion in stages to make it more affordable. Most conversions are done for free. However, ask your insurer about any costs to do so. Also, some companies offer you a credit for some of the premiums you’ve paid for your term life insurance when you carry out a conversion.

Example of Convertible Term Life Insurance

Let’s say Lisa purchased a 20-year, $100,000 convertible term life insurance policy that allows her to convert anytime before she’s 55 years old. Three years after getting the coverage, Lisa’s circumstances change. She’s been diagnosed with a treatable form of cancer and decides she wants peace of mind by getting whole life insurance, which will cover her for the rest of her life instead of ending in 17 years as her term life policy will.

Lisa figures whole life insurance will provide financial security over a longer period, thanks to the policy’s cash value component, so she converts her term policy into a whole life one. To make this switch, Lisa must pay higher premiums. However, she doesn’t need to undergo a medical exam or answer questions about her health. Her premiums will be based on her health classification when she first got her term insurance.

Term Life Insurance vs. Permanent Life Insurance

Because a convertible term policy allows you to switch from a term policy to a permanent policy, it helps to know how the two types of coverage differ.

Term Life Insurance Basics

Term life insurance covers a policyholder for a certain period of time—10, 20, or 30 years, for example. If the policyholder dies during the policy’s term, beneficiaries typically receive a lump-sum amount of money known as a “death benefit.”

A term life insurance policy expires at the end of the term unless you pay to renew the coverage. Premiums don’t change throughout the term.

Because there is a chance you will outlive the term and not receive a death benefit, term life is usually much more affordable than permanent life insurance. It also costs less because there is no cash value feature.

Permanent Life Insurance Basics

The two common types of permanent life insurance you can convert to are whole life and universal life:

  • Whole life: This type of policy covers you throughout your life unless you cash out the policy or fail to pay premiums. It has a level premium that never changes and a cash value that grows at a set interest rate. You can borrow or withdraw from the cash value, but if you don’t repay it, your death benefit may be reduced.
  • Universal life: UL also generally covers you for life. But in many cases, you can adjust the death benefit and premium amounts, which can’t be done with a whole life insurance policy. The cash value typically earns interest based on market conditions, but is subject to a minimum.

Should You Convert Your Term Life Insurance to Permanent?

Converting a term life insurance policy to a permanent life insurance may be a good option for:

  • Someone who is in poor health and wants permanent lifetime coverage rather than temporary term coverage. Convertible life insurance doesn’t require someone to go through a medical exam or divulge any information about their health.
  • Someone who is healthy now but worries that their health eventually might take a turn for the worse. A convertible policy removes concerns about what your health will be like down the road, since neither a medical exam nor a health questionnaire is needed to convert to permanent life insurance.
  • Someone who wants to make money from their life insurance through a cash value feature that earns interest on savings or can provide gains from investments.
  • Someone who can afford to pay higher premiums for permanent life insurance now.
  • Someone who wants to ensure there’s a death benefit for beneficiaries. A permanent life insurance policy is much more likely to make a payout to beneficiaries than a term life insurance policy is, simply because a permanent policy is lifelong coverage, whereas a term policy ends after a certain number of years.

Alternatives to Converting Your Term Life Insurance

Several alternatives to convertible term life insurance are available. If you have a term policy, you could instead:

  • Renew your existing term life insurance policy
  • Shop around for new term life insurance from a different provider
  • Let your term life insurance expire and go without coverage
  • Buy burial insurance, which will cover end-of-life expenses, but not much more

Frequently Asked Questions (FAQs)

What is a convertible option in life insurance?

A convertible option in life insurance refers to a provision in a term life insurance policy that allows you to convert the policy to permanent life insurance within a specified time period without taking a medical exam or answering health questions.

Does convertible term insurance have cash value?

Convertible term life insurance policies do not have cash value when they are in their term phase. However, if you convert your policy to a permanent policy, it will begin to accrue cash value.

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  1. Haven Life. “What Is Convertible Term Life Insurance?

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