What is convertible term life insurance?
When looking at life insurance policies, you may notice some confusing jargon and cover types that you’re not familiar with, such as convertible term cover.
Having life insurance in place offers peace of mind that should the unexpected happen, you’ll be covered and your loved ones will be looked after financially. However, there are numerous types of cover available, which can be difficult to wrap your head around.
Here we take a look at what exactly convertible term life insurance is and its benefits to help determine whether it’s the right cover option for you.
Convertible term cover, also commonly known as a conversion option, is a form of term life insurance. Before we delve into the details on convertible term life insurance, let’s remind ourselves what term life insurance is.
What is term life insurance?
Term life insurance is taken out for a set number of years, e.g. 20 or 30 years, and tends to be the cheapest type of life insurance. If you pass away during the term, a tax-free lump sum is paid out.
Term life insurance is a common choice for parents, who want to make sure their family is covered until their children are financially independent. Ideally, the term should bring the age of the youngest child to 25, where they are then viewed as financially independent. So if your youngest child is currently 2 years old, then you’ll need a 23-year term.
Discover the difference between term life insurance and whole-of-life insurance in our guide on what to consider when purchasing life insurance.
So, what is convertible term life insurance?
Convertible term cover allows you to extend the term of your policy at any point without having to undergo a fresh medical examination or provide any evidence of good health.
You can convert the cover under the policy into a new policy, to allow it to run for a longer period of time. However you cannot increase the sum insured, it must stay level (or else you may choose to reduce it).
Choosing convertible term life insurance mean it possible for you to make your policy last longer without having to undergo a medical examination. It allows you to bypass the medical underwriting process, regardless of whether or not your health has deteriorated.
If you didn't have convertible term cover and you wanted to take out a new policy, you’d be subject to a medical exam. If any underlying health problems were to be discovered, then your premium would go up in price. Or worse, you may be declined cover altogether.
Who should consider convertible term cover?
A conversion term policy allows for more protection against risks and uncertainties. You may want to consider this type of life insurance for a number of reasons.
- If you’re worried about future health problems: If you’re worried about developing health problems during your term, a convertible option is a good choice as it'll give you peace of mind that you're able to extend the term of your policy.
- If you’re making life changes: If you know that you’ll be making significant life changes, such as getting married, having children or taking out more loans, convertible term cover will provide you with peace of mind.
- You don’t know how long you’ll need cover: Convertible term insurance allows those who take out shorter policies to extend them. A convertible policy can give you the flexibility needed to adapt to changing situations, e.g. having another child and extending your term for longer.
Is there an age limit on purchasing convertible term life insurance?
It’s important to note that many insurers put an age limit on when a convertible policy can be taken out. Usually, insurers won’t let those over the age of 64 take out a conversion term.
Similarly, there is usually a maximum age that someone can convert their policy. Some insurers will let you convert your policy up until the age of 85, but it varies significantly depending on the insurer.
It’s best to check with individual insurers to determine what their age limits are.
How much does convertible term cover cost?
The cost of convertible term insurance will depend on the level of cover required, your age, and your life expectancy at the time of the conversion. It’s important to note that your premium won’t remain the same when you convert your policy.
It will cost more than regular term life insurance as you’re paying for the additional benefits provided.
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Helpful life insurance guides
If you found this guide helpful, why not take a look at some of our other life insurance-related articles?
- You can learn all about the basics of life insurance in this guide.
- Unsure about whether you should take out a life insurance policy? Check out our guide on the benefits of life insurance to discover why it’s so important.
- Before taking out your life insurance policy, make sure you take a look at our list of some of the most common questions asked by consumers when taking out a life insurance policy.
- Specified illness cover is commonly added to life and mortgage protection policies. You can discover what exactly specified illness cover is in this guide.