Converting a Term Life Insurance Policy to a Permanent Policy

Term life insurance is typically purchased to provide for a family in the event of the breadwinner's death. The lower initial premiums of a term policy can meet immediate needs, but a more permanent and valuable life insurance contract may be needed to provide security and more stable premium payments for the future.

Like term life insurance, permanent life insurance provides a guaranteed death benefit, but it also has the following additional benefits:

• Premiums remain level for the life of your policy.
• Cash value accumulates tax-deferred and can be borrowed at favorable rates or withdrawn to supplement retirement, college funding, or other future cash needs.
• Some contracts allow you to select funds in which to invest, giving you greater control over your policy's cash accumulation.

Most term policies include a conversion privilege or credit that allows policyholders to convert to a permanent contract at a later date. When converting from term to permanent, rather than purchasing a new permanent policy, there is no need to undergo a new medical examination or provide current financial information (as long as there are no increases in the amount of coverage or additional riders).

When you convert your term insurance policy to a permanent contract, your family will be provided for in the event of your death, but your premiums will also work hard to build tax-deferred cash value that you can draw on in the years to come.