Can I convert my life insurance with another company to avoid a premium hike?

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Dear Insurance Adviser,
I currently have a $500,000 level term life insurance policy. The premium is scheduled to increase from $525 a year to $7,000 per year. I would like to convert this term life policy to permanent universal life or variable universal life with another insurance company but without having to go through a physical exam. Will I be able to find an insurer willing to convert another company’s term policy in this way?
— Samantha

Dear Samantha,
The short answer is “no.” You won’t be able to convert an existing term life insurance policy to a permanent one with anyone other than your current insurance company or an insurer that acquires the company and all of its policy obligations.

Your existing policy has a 20-year term and level premiums. The good news about that policy is that the rates have been unbelievably reasonable and were guaranteed not to change for 20 years. The bad news is that once the 20-year guarantee is over, the rates can skyrocket — as you are experiencing. Even worse, these tremendously inflated rates will continue to increase annually — and dramatically!

There’s a saving grace for those who can’t qualify, medically, for new life insurance with another insurer. An insurance company usually offers an opportunity to convert term insurance coverage to a permanent, cash-value-type policy. If you still need coverage, I encourage you to convert your existing policy.

Remember that you have the right to convert any or all of your $500,000 of coverage, subject to the company’s minimum requirements, typically $50,000 or $100,000.

One caution: You mentioned that your rates are about to change soon. Many times, the conversion must be exercised before the date the rate changes. Check that out with your life insurance agent before it’s too late.

Good luck!

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