Term life insurance is the most practical, appropriate and affordable life insurance for 90% or more of the average person’s life insurance needs. The obvious feature that people buy term life insurance for is the death benefit. They want to know that their family is protected for a specific period of time. That period could be when your children are growing up, when you owe a substantial amount on a mortgage, or when you have a period until retirement when your missing income could be a financial setback for your spouse.
The second most valuable feature of term insurance is the conversion option. Simply stated the conversion option allows you to convert all or part of your term policy to permanent coverage, usually universal life, WITHOUT evidence of insurability.
As an example. Let’s say you take out a $250,000, 10 year term policy when you are 55 and you’re in great health and get the best rate available. 10 years later you decide that, while you don’t need $250,000 any longer, you need $100,000 to carry on beyond the 10 year term.
The problem is that during that 10 years you have had two heart attacks and have had two bypass surgeries. You’ve also been diagnosed with colon cancer that appears to have spread. Bottom line is that you aren’t insurable, but you need $100,000.
The conversion option that is built into your term policy allows you to convert all or part of your policy to a universal life policy without evidence of insurability. That doesn’t just mean without an exam. Without evidence of insurability means they will issue that $100,000 at the best rate available just like they did 10 years ago. The conversion option just made you insurable again.
Read your policy. Know your conversion option. It’s the second most valuable feature of your policy.
This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.