The most important factor to consider when determining whether to convert term insurance

Term life insurance only covers you for the set number of years that your policy stipulates – usually between 10 and 30. As you near the end of your policy term, you may realize that you want your coverage to continue. The good news is, you may not have to start over and purchase a brand new policy. Instead, you may be able to convert your term life insurance into whole life insurance without new evidence of insurability.

Table of Contents Show

Term vs. whole life
What happens to term life insurance at the end of the term?
How to convert term life insurance to whole life insurance
Reasons to consider converting from term to whole life
What is a conversion clause?
How it works
Review your policy on an annual basis
Frequently asked questions
What is the best life insurance company?
Is term life insurance better than whole life insurance?
Should you get life insurance for your child?
What factors determine how long my coverage should last?
Why should I consider a longer term length?
How to get life insurance with Progressive

If you’re considering converting your term life insurance policy to whole life insurance, we set out some steps you can take and outline who may benefit from converting their policy.

Term vs. whole life

With term life insurance, the policyholder chooses a period of time over which their policy is active – usually between 10 and 30 years. The policyholder pays premiums until the end of the term. If they die within the policy term, their beneficiaries receive the death benefit. If not, the policyholder is left without coverage when the term ends.

Whole life insurance, on the other hand, is a permanent policy. With whole life insurance, you pay the same premium amount until you pass away. Over time, the premium payments can accrue cash value which can accumulate interest or returns. You can typically take out loans against this money or make withdrawals before you pass away. However, if you do decide to borrow against your policy, the amount you borrow may reduce the face value of the policy, and your beneficiary will receive a lower payout if you do not pay back your loan.

What happens to term life insurance at the end of the term?

You may be wondering, “what happens to term life insurance if you outlive the term?” If you outlive your term life insurance policy, the premiums you paid are kept by the life insurance company, and your coverage ends unless you make arrangements in advance to convert or extend it if that option is available. For example, if your term ends on February 21, 2021, and you pass away on February 24, 2021, without doing anything to convert or extend your policy, your loved ones will not receive any death benefit because the policy ended.

How to convert term life insurance to whole life insurance

Knowing how to convert term life insurance to whole life insurance may help you if you decide you still want coverage after outliving your term life insurance policy.

Talk to your insurance company about what types of permanent life insurance are available and the conversion cost.
Fill out a life insurance conversion application.
Choose the amount of life insurance you’d like in the conversion.
Choose how you’d like to be billed for premiums (annual, quarterly or monthly).
Enter bank account information if you’re setting up automatic withdrawals.
Assign beneficiaries. Don’t forget to include their Social Security numbers.
Sign the application.
Mail, fax or upload the application.

Reasons to consider converting from term to whole life

Whole life insurance provides a few additional benefits beyond the death benefit that term life insurance provides. If you’re considering converting your term policy to a whole life policy, you may want to consider the following characteristics.:

With permanent life insurance:

Part of your premium will go towards building a cash value account: When you convert a term life product, you’ll add a second feature — a cash value account. You can typically borrow money from a whole life insurance policy after enough cash value has accrued.
Your policy won’t expire: A whole life insurance policy is permanent, meaning you’ll pay the same premiums and maintain coverage for the rest of your life unless you stop paying your premiums.
You’ll lock in premiums for life: Since a whole life insurance policy doesn’t expire, whatever the premiums you agree to will be the same for life. You’ll know what you’re paying for the rest of your life.

What is a conversion clause?

A conversion clause is a section of most life insurance contracts that allow policyholders to convert their term life insurance policy to a permanent form of life insurance. Conversion clauses are valuable because they allow a policyholder to maintain coverage without presenting new evidence of their insurability.

“The way I would describe it is when someone purchases term, in essence they are leasing insurance with an option to buy,” Patrick Bowen, vice president and senior account manager for Legal & General America life insurance says. “The convertibility clause is your chance to convert without new evidence of insurability. But if you aren’t paying attention and forget to convert within your allotted time, you are out of luck.”

The conversion clause allows heads of household, for a price, to transform their temporary insurance into permanent life insurance without having to requalify or undergo physical examinations.

Not all policies have a conversion clause, and policies that do have conversion clauses generally cost more. However, the conversion clause can be worth the extra expense, Vogel says. Sometimes paying a conversion cost is better than going without coverage when your term policy ends.

How it works

Let’s say a woman has a 20-year term policy with a 10-year conversion clause. Nine years into her contract, she develops heart disease, diabetes or some other health problem.

Because she is still within the 10-year conversion period, she can convert her term life insurance policy to a permanent one. By converting to a permanent policy in time, she would not need a new physical exam and would be eligible for coverage through a permanent policy that might otherwise be difficult to obtain without the option to convert her existing policy.

If the policy had been written without a conversion clause, she would face an expiring policy and potentially high renewal premiums.

Review your policy on an annual basis

To make sure the conversion window doesn’t sneak up, you may want to review your policy with an agent on an annual basis.

The development of a health problem is not the only reason to convert a policy. As a rule, the older you are, the more expensive you are to insure. If you can begin paying toward a permanent policy while in your 20s, the monthly premium will be much lower than someone in their 50s would pay.

And your financial needs may change as you get older. You may need a policy with a sizable death benefit to replace your income and provide for three small children, but having such a large policy may no longer be as important after you pay down the mortgage and the children grow up.

Frequently asked questions

What is the best life insurance company?

The best life insurance company is different for everyone as it depends on individual preferences and needs. One of the easiest ways to find the best life insurance company for you is to speak with an independent insurance agent and discuss your policy needs. Once you’ve decided on a policy, you may want to generate a few life insurance quotes online from multiple providers. That way, you can make sure you’re getting the right policy at the right price.

Is term life insurance better than whole life insurance?

Term life insurance is a better option for some people, and whole life insurance is a better life insurance for others. Term life insurance can be a great option for those who want affordable premiums for only a specific period of time. For instance, if you only want coverage while your children are young and financially dependent on you, term life insurance could be a great option.

Should you get life insurance for your child?

Whether or not you get life insurance for your child is a personal decision. Getting life insurance for your child early on can help their insurability later in life. If your child were to develop a health issue down the line, they may have more affordable rates by locking in a cheaper premium earlier in life.

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When determining life insurance length, you first have the option of term life insurance or permanent life insurance. You can get coverage for your entire life via the permanent policy category, which contains several types of life insurance that pay out no matter when you pass (as long as your premiums have been paid). On the other hand, the "term" aspect of term life insurance lets you select how long you'll be covered, usually 10, 15, 20, or 30 years, with some insurers offering coverage for up to 40 years.

So how do you determine whether you need 10- versus 20-year term life insurance, or a 20-year term versus a 15-year term? Carefully consider your current financial obligations and any outstanding debt to determine the maximum life insurance policy for your specific situation and needs. Having a plan that runs a little longer than you need can make more financial sense than having to purchase a new plan when the first expires.

When determining your term length for life insurance, remember the reason you're buying a policy: to provide for your family financially should you unexpectedly pass away.

Suppose you and your spouse just purchased a home with a 30-year mortgage. Consider a life insurance term length of at least 30 years. If your spouse is your designated beneficiary, they would receive the death benefit if you pass away within those 30 years, and they could use the payout for the remaining mortgage payments. However, if you die after the 30-year term expires and you didn't secure a new policy or convert your term insurance to whole life, your beneficiary won't receive a death benefit.

What factors determine how long my coverage should last?

Consider these factors when determining how much coverage and how many years of term life insurance you should get:

Your age
Your age can be a helpful indicator of how long you'll be providing your family with an income that would need to be replaced if you passed. If your beneficiaries rely on your income, consider a policy that lasts until you plan to retire — or until you plan to have enough in savings and investments for your family to be secure without your income.
Your mortgage or other debt
A life insurance policy should last at least as many years as you plan to spend paying off your mortgage or credit card debt. This can protect your loved ones from being responsible for your debts if something happens to you.
Your children
If you have young children or plan to soon, term life insurance of 15 or 20 years or longer can offer security to your family. If something happens to you, your policy could help provide for your children until they're through college or out on their own.

In general, the main influencer of life insurance term length eligibility is age. Older age comes with a higher risk of health issues, so your options might be limited to shorter term lengths if you apply for a policy at an older age. If you do qualify for a longer term length when applying at an older age, note that your age combined with the longer term length will cause the policy to be more expensive.

Why should I consider a longer term length?

Choosing a longer life insurance term length offers specific benefits:

If you plan to need coverage until you're 40 or older, you can take advantage of the lower rates you'll receive by purchasing a term policy when you're as young as possible
If you plan to take on debt later in life, you may get better rates now on a longer life insurance term length than you would on a shorter term length when you're older

How to get life insurance with Progressive

You can get a life insurance quote online through eFinancial. After answering some questions, you'll choose a payment amount, term length, and other policy details. You can also call 1-866-912-2477 to speak with a licensed representative who can help you find the right policy for you.

Please note: The above is meant as general information to help you understand the different aspects of insurance. Read our editorial standards for Answers content. This information is not an insurance policy, does not refer to any specific insurance policy, and does not modify any provisions, limitations, or exclusions expressly stated in any insurance policy. Descriptions of all coverages and other features are necessarily brief; in order to fully understand the coverages and other features of a specific insurance policy, we encourage you to read the applicable policy and/or speak to an insurance representative. Coverages and other features vary between insurers, vary by state, and are not available in all states. Whether an accident or other loss is covered is subject to the terms and conditions of the actual insurance policy or policies involved in the claim. References to average or typical premiums, amounts of losses, deductibles, costs of coverages/repair, etc., are illustrative and may not apply to your situation. We are not responsible for the content of any third-party sites linked from this page.