Published 12/9/2010, updated 11/25/2019
2009 saw some revolutionary changes in term life insurance, and when I use the word revolutionary I am thinking more like the revolutionary war than revolutionary as in good change. In 2009 there was the introduction of the “Term/UL” by a few companies and the shredding of the conversion option or privilege by a few other companies. For those of us who have been in life insurance for a long time and for those clients who have used their conversion privilege, there is something sacred and awesome about it. Converting means being able to carve out all or part of an in force term policy and make it permanent, as in it lasts until you die. You get to do that without any health questions and with your health rating guaranteed to be the same as it was even 20 years prior is huge. You don’t even have to apply. You just ask them to make the change.
Then came 2009 and Protective Life, West Coast Life and Empire General and the gutting of the conversion privilege.
Just to put things in context I pulled out a few of my policies to see what their stated conversion option was at the time I took them out.
Genworth Life and Annuity 1999 – “The new policy may be on any whole life or endowment plan available for this purpose on the date of exchange…..there will always be at least one plan available for exchange…..The new policy will have the same premium classification as this Policy.” Whole life and endowment plans are guaranteed to be permanent.
North American 2002 – “You may convert up to the face amount shown n the Table of Values in the Policy Year Conversion is requested, without evidence of insurability to an individual permanent life insurance policy then available from Us for Conversion…..”
Prudential 2009 – “You may convert this contract to a new contract of life insurance on the Insured’s life. You will not have to prove that the Insured is insurable…..The new contract will be the same as this contract…..It (the new contract) may not end before the Insured reached attained age 100.”
The common thread that runs through all three of these is that there is a clear promise of a conversion to a permanent policy. Even though companies like West Coast Life will tell you that technically a policy is permanent if it runs to age 100 on the assumed or non guaranteed side, I can’t think of any circumstance where I would look someone in the face and tell them that, even though their policy is only guaranteed 10 years, it is a permanent policy. That is simply a lie. There is no policy out there with a 10 year guarantee that will last a lifetime without huge increases in the premium. In the case of West Coast Life even adding money doesn’t help. I have run illustration after illustration and no matter what kind of money you throw at it, 10 years is the guarantee.
FYI, after much screaming and yelling Protective and West Coast added a whole life policy, but they still let their clients down. The whole life policy only had one rate class, standard. So if you were approved at preferred plus and wanted to convert to a true permanent policy with those companies, you were dropped two rate classes to standard. That move made your conversion far more expensive than it should have been
Bottom line. I think it is a time for agents to be prudent in their sales and advice and make sure your customers understand what is promised and what isn’t when it comes to conversion. Conversion is still the gold nugget it’s always been with the exception of a few companies who are now trying to pawn off fool’s gold for the real thing. If you have questions or don’t know what your conversion option is, call or email me directly. My name is Ed Hinerman. Let’s talk and clear up any confusion.