by Glenn Cooke
In today’s video, we’re going to look at convertible term life insurance.
Now, this is becoming increasingly important as providers are starting to roll out term life insurance policies that are not convertible. So the question of course is, do you care?
And the answer is, you may not care but if you DO care then it’s going to mean everything. And you’re not going to know if you care until towards the end of your term policy.
So what conversion says is, up to a specific age, it’s often ages 70 to 71, you can opt, at your choice to exchange a term policy for a permanent life insurance policy without any medical questions.
Now, where does that become useful? Well, if you purchase a term policy and at the end of your term, let’s say 20 years from now you become uninsurable if you have conversion you can simply hand back your term policy and say “reissue it, no questions asked” as permanent lifetime insurance and it’s guaranteed that you can do that.
If you don’t have a conversion that option’s not available to you and now you’re uninsurable and you’re simply done with life insurance and no further opportunity to ever get any again.
The question is, do you care if you have the renewable provision or not? And the answer should be, you should care a lot. More specifically, it’s something you may not care about, but if you do care, you’re going to care a lot.
So, what’s renewable mean?
What renewable means is, that when you purchase a term policy, the premiums are level for a period of time such as 10, 20 or 30 years. What happens at the end of that term? If your policy is not renewable, your coverage is over abruptly with no options.
If the policy is renewable, your policy actually stays in force but the premiums go up. So you do have the option with a renewable term policy to keep your insurance past the initial term. Why is this important? If you hit the end of your 20-year term policy, so now you’re 20 years older, and you’ve become unhealthy or you need time to make a decision on a new life insurance policy and your policy is not renewable, you’re done. If it is renewable you have time to make some decisions. That’s why it’s important, it gives you options with your life insurance at the end of your term.
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