Should you convert your term life policy into whole life policy?
Most of the life insurance applicants buy term life coverage, which goes on for a set timeframe (ranging between 10 to 30 years) before it gets expired. A term life policy works well in case of uncertainty. It secures your family’s future financially in your absence. But as the policy term approach towards its end, you realise that you still need life coverage to give a security net to your loved ones and you decide to renew your policy or buy a new term life policy online. In such a situation, you might have the option to change your term plan to a whole life policy or any other type of life insurance.
At the point when you convert your insurance policy, you won’t get a higher death benefit, and you might settle with a lower sum, but you might save some money by not opting for a brand-new whole life policy. Here are some more details on how the conversion of life insurance works and whether it’s the correct move for you or not.
Why should you convert a term life policy into a whole life policy?
In an ideal situation, you will not require life insurance coverage when your term life policy gets over, which is usually 10 to 30 post purchasing it. Due to the fact that till that time your dependents won’t depend on your salary any longer, and you’ll have paid off (or about to pay off) your outstanding debts.
But there might be a situation where an independent family member might become dependent again because of some illness or mishap. Or on the other hand, possibly you have taken some loan lately that you would prefer not to leave to your family. There are various reasons why you may need to extend your insurance coverage post its original term.
The primary advantage of getting your term life policy converted into whole life policy rather than applying for a new whole life insurance policy is that in most cases you won’t require to take a medical test or evaluation of your lifestyle. This implies that converting policy into another one will probably cost less than buying an entirely new whole life policy. As you will be older while applying for a new policy and might have developed health issues which could result in higher premiums or even prevent you from getting a new insurance policy.
Important pointers to remember while converting your life insurance policy
Usually, most term life policies incorporate a term conversion rider that permits you to convert your current term plan to a whole life policy. In case your policy doesn’t have or if you are not sure about it, then speak to your insurance provider.
The conversion of policy is possible only during the conversion period. Now, what is a conversion period? The policy conversion rider will determine a period of conversion, or a period in which you can convert your policy. Generally, this conversion time frame begins two to five years after your policy is in force and gets over either towards the end of your term or at a specific age which is usually somewhere between 65 and 70. However, the exact date and length of the conversion period vary from one insurer to insurer. Therefore, make sure that you check the guidelines of your policy.
You can opt for converting just one part of your term policy
Insurance providers might offer an option to convert your policy partially in case you need to expand your life coverage but don’t require a considerable death benefit. Let’s assume you presently have a Rs 2 crore term policy that you need to convert into a whole life policy. Since the premiums of Rs 2 crore, whole life policy might be costly, and your dependents probably won’t need that much insurance coverage at this point. Hence, converting the entire policy might not be a right move, and you can opt for partial conversion.
For example, in case you decide to convert half of the policy that is Rs 1 crore to whole life policy and the other half would remain a term life policy. In this way, you will have two life insurance policies – Rs 1 crore term life policy and Rs 1 crore whole life policy and you will save money in contrast with paying expensive premiums for Rs 2 crore whole life policy.
How much will it cost you in the conversion process?
Well, when you convert your term life policy to a whole life policy, the conversion procedure itself doesn’t cost anything. But as the whole life insurance is usually about 6 to 10 times costlier than term life insurance, so be prepared that your premiums will rise significantly after the conversion. However, here you might choose to convert your term policy to save some money partially.
Therefore, if you are planning to convert your existing term policy into a whole life policy, then first, you should go through the guidelines of the policy carefully. Then analyse the cost factor involve based on your responsibilities and affordability as whole life policies are expensive than term policies. And after all consideration, you should make the final decision. If by any chance you get confused, then you can speak to the insurance experts of BimaKaro.in they will help you understand all the factor and criteria involved in the conversion process.