What are the benefits of a thermal conversion?
- You retain the original health rating from the term policy when you convert, even if you have developed health problems that would normally increase your prices on a new insurance policy or make you uninsured.
- You can decide when and how much of the coverage to convert – as long as it is before the conversion expiration date.
- You can start building cash value with the new permanent policy.
- It provides life insurance for the rest of your life.
Why does this conversion option matter?
Less than 1% of life insurance owners convert their insurance policies. Most people only need life insurance and the premiums are very expensive when you convert so most people choose not to do so. But for the 1% of people who convert, the increased payments are worth it.
As mentioned earlier, when you convert an insurance policy to a permanent insurance policy, you are not taken out again. You do not have to prove that you are still insurable. Those who convert are people who suddenly have a shortened life expectancy and who would probably be considered uninsured if they tried to apply for more life insurance.
These individuals have loved ones that they do not want to leave suffering under the weight of medical bills and funeral expenses. Imagine that you own a 20-year-old life insurance product and find out that you have an incurable disease just one or two years before your life insurance is about to expire. With a conversion option, you can turn that insurance period into a permanent insurance policy that ensures that the insurance company writes a check on death benefits to your family.
The death benefit from a life insurance policy will not bring you back and it will not heal the emotional suffering, but it can help relieve any financial pain that would have arisen as a result of your sudden death. Yes, premium payments increase drastically when you convert, but if your time on this earth is limited, the cost is probably worth it.
When you apply for life insurance on Quotacy.com, you will be able to see if the product has a conversion option before you even apply. Most of the insurance companies that Quotacy cooperates with include a conversion option on their insurance contracts – free of charge.
Are there alternatives to conversion?
A life insurance does not provide coverage forever. If you want more life insurance, there are alternatives to conversion.
Buy a new policy
Depending on your age and health, you may be able to buy a new life insurance policy if your term expires soon.
To buy a new life insurance policy, you need to go through the insurance process again, but chances are you will save a lot of money with this option compared to converting.
You may need life insurance for various financial commitments. To save money, you can choose to buy several insurances that expire at different times.
Examples of laddering life insurance policies
Todd, 35, wants life insurance to protect his family’s finances. He wants to make sure that the death benefit can replace his income, support his children’s college and let his husband pay the loan.
Todd wants at least a million dollars in coverage to begin with but needs less later in life as his children get older and his mortgages decrease.
He decides on the following three policies:
- Police # 1: 30-year life insurance of 275,000 USD
- Monthly premiums = $ 23
- Lasts until Todd is 65 years old
- Police # 2: 20-year-old $ 750,000 life insurance
- Monthly premiums = $ 29
- Lasts until Todd is 55 years old
- Police # 3: 10-year $ 500,000 life insurance
- Monthly premiums = $ 15
- Lasts until Todd is 45 years old
Compare that to Todd buying a $ 1,525,000 30-year life insurance policy for $ 95 a month.
Renew your terms policy
Most life insurance policies give you the opportunity to renew your insurance cover at the end of the semester. Just like the conversion option, you do not have to prove that you are insurable in order to renew.
To renew your coverage for another year, you will have to pay a much higher premium. And every year you choose to renew, the premium increases once again.
But for someone who finds out they have a fatal illness but their term policy will expire soon, the renewal option can be life-saving for the family.
Renewal can be a better option than converting if your life expectancy has suddenly decreased and you only have one or two years left to live.
If you are considering converting your insurance period into a permanent insurance policy, these are important things to know.
- Whatever risk class you were approved for when you bought the futures insurance, you keep it when you convert, even if your health has deteriorated.
- Your current age will be taken into account when determining the price of your new permanent insurance, unless you choose the original age and pay a lump sum.
- Your insurance premiums become more expensive when you convert to a permanent insurance.
- Some insurance companies require that a minimum amount of coverage be provided on the original insurance if you make a partial conversion.
- Each life insurance company has its own limitations as to when you can convert. For example, some operators do not allow you to convert within the first five years, some allow you to convert only within the first twenty years, and some allow you to convert at any time.
- Life insurance companies set a maximum age for when you can convert. For most carriers, this age is either 65 or 70.