Renewable and Convertible Life Insurance

Life insurance is one option to provide for your loved ones after your death. The financial security it gives might help your family maintain the life you made together.

You must first choose between the two primary forms of life insurance: term life insurance and permanent life insurance. Term life insurance protects you for a set period of time, often between 10 and 30 years. Permanent coverage lasts your entire life as long as you pay your payments and keep the contract in effect.

In essence, term coverage will expire whereas permanent coverage will not; however, by choosing Renewable & Convertible Life Insurance, you can increase your life insurance options.

Differences between renewable and convertible life insurance

What is renewable term life insurance?

Renewable life insurance refers to a term life insurance provision that allows you to include a renewal clause in your policy.

So, when a term contract expires, you may reapply for another term increment without having to go through another set of medical exams. This ultimately relies on the insurance company and contract terms.

For example, most contracts at Sure Insurance are renewable, but not all of them. It is determined by the issue age and length of the term contract; it is not an optional feature that the purchaser may add. When coverage is renewable, it continues beyond the term period until the age of 95.

This is beneficial if your health weakens during your original term since you will not be rejected for another term of coverage due to insurability. In exchange, the insurer often charges a higher premium since it is taking on greater risk.

Pros and Cons of Renewable Term Insurance

Pros

• Avoid underwriting.

You can renew your contract without having to take a new medical test or answer health-related questions. Your contract cannot be refused, even if you have developed a new ailment or your health has deteriorated.

• Flexible coverage.

You can let your contract expire if you no longer require it, or you can keep it active. Some contracts even let you to lessen your coverage if you don’t require as much.

• Convenience.

You will not need to browse around or fill out additional applications.

Cons

• Rising premiums.

Your premium will rise depending on your age upon renewal.

• There is no cash value.

Term policies do not increase monetary value.

• There is a limited time period.

You may be unable to prolong your contract for as long as you want. Many insurance companies will limit coverage to a specific age.

What is convertible term life insurance?

You may also be able to include a convertibility clause in your term life insurance policy, which allows you to convert it to permanent coverage at renewal or at specified milestones throughout the term.

You may have chosen term life insurance because you were on a limited budget and had other mid-life costs, such as a mortgage or raising children. But maybe you’re ready to commit to permanent life insurance or seeking for one of its key features—accessing its cash value.

Sure Insurance’s term insurance is convertible within the first five years of the contract. There’s also an extended conversion function that allows clients to convert until age 70, or the length of their term (whichever is sooner).

Like the renewability feature, you won’t need new medical underwriting to convert the contract, which means it won’t matter if your health has worsened. You get to maintain your coverage and get upgraded benefits, though it’ll also come with a higher premium.

Pros & cons of convertible term insurance

Pros

• Avoid underwriting.

the convertible term, like the renewable term, lets you substitute your term insurance for a permanent one without going through underwriting again.

• Boosts monetary value.

Permanent life insurance not only provides a death payment but also accumulates monetary value.

• Permanent coverage.

Convertible term insurance provides you with permanent coverage that you may maintain even if you no longer qualify for a term contract.

Cons

• Higher premiums.

Convertible term is more expensive than renewable term or term insurance without a convertibility clause.

• Limited conversion period.

Your contract will specify the period within which you can convert. This might be before a specific age or within a set number of years after the date you purchased your contract.

• Few choices.

There are several forms of permanent insurance. Your contract may only enable you to change to a single kind or offer restricted alternatives for riders or contract features.

Convertible term life insurance quotes

All term life insurance firms will provide renewable life insurance options. Because term life insurance is available from all providers, you can get renewable life insurance from any business.

Convertible life insurance is a little more difficult. If a provider provides both term and whole life insurance, they will almost probably offer a convertible option. What you must decide is if you want permanent coverage offered by that firm, as there are significant distinctions between providers when it comes to permanent life insurance.

Canada’s three largest life insurance firms (Beneva, IA, and Manulife) provide the most flexible permanent (whole) plans on the market, including universal life insurance.

Some bank-owned life insurance providers offer basic permanent policies, but they’re generally less sophisticated than stand-alone companies.

What is yearly convertible term life insurance?

Yearly convertible term life insurance is a type of term life policy in which the policyholder can convert their coverage to a new permanent policy every year without having to undergo extra medical exams. This conversion option provides buyers with continuous flexibility after the first-term policy goes into force.

Most common term life insurance policies only allow you to switch coverage to permanent insurance at specific intervals, such as at the conclusion of the premium period or after a new medical diagnosis.

However, yearly convertible term life insurance allows policyholders to review their life insurance needs and choices on an annual basis, switching to a new type of coverage that better meets their changing priorities.

Instead of expiring after a set period of time, the new policy converted each year might provide perpetual insurance coverage. It may also generate monetary value that stays available to the policyholder.

Conversion allows consumers to adapt to health or lifestyle changes as they occur by switching their coverage.

The biggest disadvantage of yearly convertible term life insurance is its high cost. The built-in flexibility raises annual premium rates by 15% or more when compared to regular term insurance.

However, other people believe that the longer-term control over their coverage selections is worth the greater initial investment. The conversion option included in these layouts enables adaptive planning as the years pass.

What is level premium convertible term?

A level premium convertible term is a form of term life policy that not only provides the option to convert to permanent coverage at the conclusion of the term period, but also assures that the initial premium price will stay level for the duration of the term period, with no increases. This combination of steady level pricing with conversion flexibility results in a unique, adaptive strategy.

Most other term life insurance policies have annual renewal periods, in which the death benefit remains fixed but the premiums increase each year as the insured matures.

Level premium convertible term life, on the other hand, locks in not just the death benefit face amount but also the actual dollar rate itself for the full policy term of 10, 15, 20 or 30 years.

Knowing that rates cannot climb during the first few years of coverage provides policyholders with greater financial certainty in their budgeting projections.

Then, as the end of the term approaches, the conversion option allows you to review your existing insurance needs and simply transition to permanent, lifetime coverage if desired, with no new medical criteria.

In essence, level premium convertible term life offers inexpensive short-term rate stability as well as future conversion flexibility, this provides security for both near-term income replacement goals and prospective lifelong coverage demands that may arise for older policyholders as their conditions change.

In conclusion, a term life policy is either convertible or renewable; however, not all convertible term life insurance is the same. Each policy has its own conversion rules.

Some carriers, for example, limit the maximum age for conversion to 65, while others let you convert until the age of 70. Some carriers just have greater conversion rates, and with any convertible policy, your selections are limited to permanent plans that are qualified for conversion.

Also, keep in mind that even if your policy is convertible, each year you wait to convert increases the conversion rate by 10 to 15 percent since you will be moving into higher-rate classes as you age. If you know you want to change to permanent coverage, you’re better off doing it while you’re younger and in a lower-rate class.

Frequently Asked Questions about Renewable and Convertible Life Insurance