Can You Convert Term Insurance to Whole Life Insurance

Whole Life Insurance Policy

As the name suggests, a whole life insurance policy is a life insurance policy that covers the policyholder's whole life. This means that the tenure of this kind of life policy is the policyholder's whole life. Generally, 99 years of age is considered the whole life of the policyholder for these policies. So, a whole life insurance policyholder is secured under the insurance cover until they live or turn 99.

While Amit understood this basic concept of the policy, he was still a bit confused about how it differs from any other term insurance plan. He, therefore, asked, "I see, but how exactly is it different from a term insurance plan, then?"

Term Insurance Policy V/S Whole Life Insurance Policy

A term insurance policy and a whole life insurance policy are both types of life insurance and are similar for the most part. However, there is a slight difference between them. A term insurance policy covers the policyholder only up to the extent of their life, generally till the premium tenure ends. On the other hand, A whole life insurance policy covers the policyholder for their entire life, even when the premium tenure is over.

Still unsure if he needed such a policy, Amit asked, "How could one determine whether life insurance was necessary?"

Which Policy Will Work Better For You

While a comprehensive insurance policy is good for anyone and everyone, individual needs differ depending on the person's personal and financial standing. Conventionally, a whole life insurance policy is good for someone who is the sole or primary breadwinner of the family. This means that the entire family depends, at least for most of it, on a single person to fulfill their financial needs.

Amit nodded thoughtfully and said, "Oh, so cool! That means I don't need a whole life insurance policy because, even though I'm the primary earner, my family would still have my inheritance and rental income to rely on if something happened to me, right?" Rahul chuckled and replied, "Well, technically, yes—but it's not always that simple.

While people with alternative earning sources or significant savings may not have a prima-face need for a whole life insurance policy, it is crucial to consider factors like the family's evolving financial needs and even inflation. Knowing if their savings will sustain their family's changing financial needs while combating inflation is crucial. If not, then even people with alternative earning sources or significant savings should consider a whole life insurance policy.

Realizing the importance of a whole life insurance policy, even with his solid financial standing, Amit quickly asks, "Can Policyholders Convert Their Existing Term Insurance Policy To A Whole Life Insurance Policy?"

Converting A Term Insurance Policy To A Whole Life Insurance Policy

Generally, most insurance companies provide policyholders the option to convert their term insurance policy into a whole life insurance policy, at least up to a point. While no additional medical test is usually required for the conversion, there might be a fee related to the conversion. However, insurance companies usually provide credit on the first few months of the whole life insurance policy, which might set off high conversion charges.

To better understand the process, Amit enquired, "How Can Policyholders Convert Their Term Insurance To A Whole Life Insurance Policy?"

Steps To Be Taken

The steps to convert a term insurance policy into a whole life insurance policy will differ for insurance companies depending upon their internal working. However, more or less, the steps will look like:

Check Eligibility & Policy Terms

Review your term insurance policy to see if it includes a conversion option and if you're within the allowed conversion period.

Consult Your Insurance Provider

Contact your insurer or agent to understand the available whole life insurance options, costs, and any additional requirements.

Submit a Conversion Request

Fill out and submit the necessary paperwork to initiate the conversion. Most insurers do not require a new medical exam.

Pay Required Fees & Adjusted Premiums

Depending on the insurer, there may be a conversion fee or a change in premiums. Some companies offer credits to offset initial costs.

Activate & Review Your New Policy

Once approved, review your new whole life insurance policy carefully to understand coverage, cash value benefits, and premium commitments.

Finally, Amit wanted to know how the new life insurance policy would work once the conversion was completed and asked his final question: "Now that the policy has been converted, how will it work?"

How Does A Whole Life Insurance Policy Work?

A whole life insurance policy converted from a term insurance policy would work similarly if the policyholder had bought the policy directly. The policyholder would start paying higher premiums, but his coverage would last for life. Additionally, if the policy terms allow, part of the premiums would go into a cash value account, which could be used for future expenses, loans, or premium payments.

Frequently Asked Questions

Does a converted whole life insurance policy work differently from normal?

No, a converted whole life insurance policy does not work differently from normal. It functions the same way as a whole-life policy purchased directly.

Is it possible to do a partial conversion instead of a full conversion?

If the insurance company allows, it is possible to do a partial conversion instead of a full conversion. It is a good option for people who cannot afford a full conversion due to the increased premium amount.

Will I need to undergo additional medical tests for the conversion?

Generally, when the conversion is done within the said time frame, the policyholder is not required to undergo additional medical tests.