Key takeaways

  • Some term life insurance policies can be converted to whole life insurance before the end of the policy term
  • check your policy to see if it includes the option to convert.
  • Some policies come with a built-in conversion provision while others require you to purchase a rider to make them convertible.
  • Consider the benefits and drawbacks of converting your policy to determine if it makes financial sense for you.

Do you have term life insurance and are nearing the end of your policy term? You may be considering a whole life insurance policy that provides long-term coverage. The good news is some term life insurance policies are convertible, which means you might not have to start the search for a new policy from scratch. If you’ve purchased a term policy that allows for conversion (and haven’t missed the deadline) you might be able to secure a whole life insurance policy without evidence of insurability or medical underwriting. Bankrate’s insurance editorial team breaks down what you need to know about converting term life to whole life so you can determine if it makes sense for your situation.

Term vs. whole life insurance

With term life insurance, the policyholder chooses a period during which their policy is active — usually somewhere 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 that does not expire as long as you pay your premiums. With whole life insurance, you pay the same premium amount until you pass away. Over time, the policy can accrue cash value, which is money that is accessible to you while you’re still alive.

What happens at the end of a life insurance term?

You may wonder 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).

To illustrate, assume your term ends on January 15, 2023, and you pass away on January 25, 2023, without taking the necessary steps to convert or extend your policy. In this case, your loved ones will not receive any death benefit because the policy ended.

Can I convert term life insurance to whole life insurance?

If you’re wondering how to convert your term life insurance to whole life insurance, it might be easier than you think. Some term life insurance policies can be converted to whole life at the end of the policy term. Review your policy documents to confirm if this option is available to you.

If you’re unable to determine if your life insurance policy is convertible or have questions about how the process works, reach out to your life insurance provider to review disclosures regarding the conversion rider with you, or, if you have a non-convertible policy, discuss other coverage options that may be available to you.

If conversion is an option on your policy, a term conversion rider will be included in the policy documents. The policy documents will also specify the conversion period, or time frame that you can make the switch, which is typically sometime before the end of your term (so make sure you are familiar with the deadlines outlined in your policy).

If you haven’t yet purchased term life insurance, it’s worth inquiring about a term conversion rider before moving forward.

It might increase the cost of your term policy, but it could also save you money in the long run as your premiums after conversion are typically determined by at least some elements of the rate class you were placed in when you originally secured the term policy. So, if you decide to convert a term policy when you’re a bit older, you’ll likely get lower premiums than you would if you were purchasing a new whole life policy.

Can all term policies be converted to whole policies?

Each life insurance company and policy is different, so your ability to convert term to whole life will depend on your situation. Some policies will have a conversion clause built in, and some will require you to buy a conversion rider. But in some cases, you may need to add a conversion rider to your policy to give you the option to convert term insurance to whole life insurance.

It’s possible that your policy won’t have a conversion provision at all. In fact, some insurance providers offer non-convertible policies designed to provide temporary coverage at a cheaper rate. Again, the best way to know if you’ll be able to convert your life insurance from term to whole is to talk to your agent.

What is a conversion clause?

A conversion clause is a section of a life insurance contract that allows policyholders to convert their term life insurance policy to a permanent form of life insurance. Conversion clauses may allow a policyholder to maintain coverage without presenting new evidence of their insurability.

A conversion clause allows a policyholder to transform their temporary term insurance into permanent life insurance without having to requalify or undergo medical examinations. Your premium will likely be higher as whole life insurance is typically more expensive than term, but your rate will still likely be lower than it would have been if you purchased a new whole life insurance policy at the same age rather than converting an existing term policy.

How to convert term life insurance to whole life insurance

Knowing how to convert term coverage to whole life insurance may help you if you decide you still want coverage after outliving your term life insurance policy. Here are the steps you could take to convert your policy, but specific steps may vary based on your company and policy.

  1. Determine whether your term policy includes the option to convert—and whether you are still ahead of your policy’s stated conversion deadline.
  2. Talk to your insurance company about what types of permanent life insurance are available and the conversion cost.
  3. Fill out a life insurance conversion application.
  4. Choose the amount of life insurance you’d like in the conversion.
  5. Choose how you’d like to be billed for premiums (annual, quarterly or monthly).
  6. Enter bank account information if you’re setting up automatic withdrawals.
  7. Assign beneficiaries.
  8. Sign and submit the application.

Pros and cons of converting term to whole life insurance

If you’re considering converting your term policy to a whole life policy, you may be wondering about potential downsides. Below are some pros and cons of converting term life to whole life insurance that you may want to understand before making the decision:

Pros Cons
Gives you the ability to obtain permanent coverage, often at a cheaper rate than if you purchased a new whole life policy when you’re older.
Medical exams aren’t generally required when you convert term to whole life insurance.
May help you obtain permanent coverage if you’ve developed a new health issue that could prevent you from qualifying in a standard underwriting process.
You may have to add a conversion rider to your term policy, which could increase your term life premium.
Your whole policy will cost more than your term policy once you convert.
You may be limited in the types of policies you can convert to. You may have more options if you simply purchase a new policy.

When to consider converting your term policy to whole life

There are several reasons why converting your term policy to whole life could be a smart move:

    • Term life insurance is attractive for many reasons – the affordability of coverage is a key benefit. However, it doesn’t last forever, and you may have chosen this option because you couldn’t afford a whole life insurance policy when you purchased coverage. If you now have more wiggle room in your budget, making the switch to a whole life policy might be sensible.
    • If you’re dealing with medical issues, the insurance premiums for whole life coverage are typically on the higher end. Or you risk being rejected for coverage on the grounds of being uninsurable. But if you convert your term policy, you can skip the underwriting process, which generally includes a medical exam, and secure coverage without paying as steep a premium due to your health.
    • The thought of leaving your dependents behind without the financial support they need can be nerve-wracking. This is especially true if you’re the primary breadwinner, hence the viability of switching to a whole life policy. You’ll have peace of mind knowing you can still provide for your loved ones when you pass away. But if you don’t make the switch and pass away after the term ends, your family won’t be protected.
    • If you don’t have dependents that rely on you for financial support, converting your term policy to a high-value whole life policy may not make financial sense. Still, it might be worth considering as your family will need to cover your final expenses when you pass away. Even if the policy carries a small death benefit, you could prevent your loved ones from having to take responsibility for these expenses.
    • Depending on how much debt you carry, it can be challenging for your family to take care of your debt obligations should you unexpectedly pass away. However, converting your term policy to whole life insurance might be a way to alleviate the added stress of paying off debt as they can use the death benefit to take care of your outstanding obligations.
    • Unlike term policies, whole life insurance policies build cash value over time. Each time you make a premium payment, a portion of it is invested and grows tax-free. As the cash value on your policy accumulates, you can earn dividends and apply it to premium payments, use it to acquire more coverage and access the funds if needed. Keep in mind that if you take money from your cash value account and do not replace it, your death benefit will be reduced. Conversely, the cash value will not be added to your death benefit and will revert to the insurance company upon your death. Still, cash value can add some financial flexibility for you.

Frequently asked questions

    • The best life insurance company is different for everyone as it depends on individual preferences and needs. Consider speaking with a certified financial planner to determine what your financial goals are. Then identify a handful of life insurance companies that offer the types of policies you are most interested in and request quotes from each to compare.
    • Term life insurance is a better option for some people, and whole life insurance is a better life insurance for others. Term life insurance may 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 choice. Whole life insurance might be better for someone who knows they want to leave a death benefit to their beneficiaries no matter when they pass away.
    • The timing of your conversion depends on your insurer and your policy. If your policy can be converted, you should receive a notification of your eligibility and what is needed to complete the process. To convert life insurance from term to whole, you must act within this period. You likely won’t be able to decide you want to convert on the last day of your term. Most policies have a period between 30 and 90 days prior to the end of the term that allows for the conversion option to be exercised, but it could be up to a year or more in advance of your term ending. If you know you want to convert term to whole life insurance, you should talk to your agent as soon as you decide to see what the process is.
    • You won’t pay a fee to convert term life insurance to a whole life policy. However, you can expect increased premiums to continue coverage after making the switch. Some providers offer a conversion credit, or a discount that helps offset costs in the first year of carrying the new policy. Contact your insurance company to find out if this option is available to you.