Converting a term life insurance policy to whole life insurance

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Term life insurance only covers you for the set number of years that your policy stipulates – usually between 10 and 30. At the end of your policy term, you may realize that you want your coverage to continue. If this describes you, 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.

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. You pay the same premium amount for the entire length of the policy. Part of the money goes towards your death benefit, while the other part goes into a cash value account. Cash value accounts are savings or investment accounts that grow over time through interest or returns. You can borrow loans against this money or make withdrawals before you pass away.

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

You may be wondering, “what happens to term life insurance if you don’t die by the end of the term?” What happens if you outlive your term life insurance policy is that all the premiums you paid are kept by the insurance company and your coverage ends. For example, if your term ends on February 21, 2021 and you pass away February 24, 2021, 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 is a good idea. Converting a temporary policy into a permanent one will save you from losing all the money you paid in premiums if you outlive the term. Here’s how:

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

Reasons to consider converting from term to whole life

Whole life insurance expands on the benefits of term life. You’ll still have a death benefit you can leave to your beneficiaries, but a whole life policy adds more. Here’s why you should convert to a permanent policy:

  • Build a cash value account: When you convert a term life product, you’ll add a second feature — a cash value account. You can access the money in the account by borrowing from it and paying it back.
  • Your policy won’t expire: A whole life insurance policy is permanent. Once you convert from a term policy with an expiration date, you can’t be kicked out of the permanent policy, 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 clause written into most term insurance contracts allows a policyholder to make that life insurance conversion.

“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 ones that do generally cost more. But that clause can be worth the expense, Vogel says. Sometimes paying a conversion cost is better than going without coverage.

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, the policyholder develops heart disease, diabetes or some other health problem.

Because she is still within the 10-year conversion period, the policyholder is free to convert the policy. By converting to a permanent policy in time, she would not need a new physical exam and would have the same coverage at a lower annual premium than that of a new policy.

If the policy had been written without a conversion clause, the policyholder would be faced with an expiring policy and astronomical renewal premiums, if she were insurable at all.

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. So, 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 – and life insurance can be a good investment if your child chooses to borrow against their cash value account or withdraw from it later in life. If your child were to develop a pre-existing condition later in life, they may have more affordable rates by locking in a cheaper premium earlier in life.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a finance and business journalist who has been featured in Bankrate, Business Jet Traveler, MSN,, and She regularly travels to Africa and the Middle East to consult with women’s NGOs about small business development and works with select startups and women-owned businesses to provide growth and visibility.
Edited by
Insurance Editor