Converting a term life policy to a whole life policy

If you need more life insurance coverage when your term life insurance policy expires, you might be able to switch to a permanent life insurance policy.

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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

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Kristi Sullivan, CFP®

Kristi Sullivan, CFP®

Certified Financial Planner

Kristi Sullivan, CFP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, she was a regional consultant at Fidelity Investments for nine years.

Updated|5 min read

The majority of life insurance shoppers purchase term life insurance, which lasts for a set period of time (usually between 10 and 30 years) before expiring. Term life insurance is the best option for most people because as you get older, your financial obligations — such as paying off a mortgage or supporting children — usually decrease and life insurance coverage becomes less necessary. It's also the most affordable option.

But, as the end of your policy’s term approaches, you might find that you still need life insurance to provide a safety net for your beneficiaries. In this event, you can convert your term policy to a whole life policy that does not expire. Most policies include a term conversion rider that allow you to do this.

When you convert your policy, you could potentially save on some of the costs associated with taking out a brand new whole life insurance policy, especially because the cost of buying life insurance increases as you age.

Key Takeaways

  • Most term life policies include a rider that lets you convert your policy to a whole life policy before the end of the term

  • Converting a term life policy to whole life can be a good option for people who still need coverage towards the end of their term

  • Policy conversions usually do not require additional underwriting

When to use a term conversion rider

There are a number of reasons why you might need to convert and extend your life insurance coverage past its original term, perhaps indefinitely:

People still rely on your income

If you have a child with a disability or provide for aging parents, you may be providing for your dependents for the long-term.

Outstanding debts

Maybe you’ve taken on some unexpected debt in recent years that you don’t want to leave to your family. If you have any outstanding credit card debt, mortgage payments, or student loans, life insurance ensures your loved ones don’t get stuck with the financial burden if you’re gone.

No additional underwriting

The main benefit of converting your existing term policy to a whole policy — rather than applying for a brand new whole life insurance policy: you won’t be required to undergo additional underwriting.

This means that a policy conversion will likely cost less than taking out an entirely new policy, since you’ll be older and may have developed new health conditions that could raise your premiums or even disqualify you from purchasing new insurance. When you convert a policy, your health class rating remains the same if you stick with the same.

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How to convert your life insurance policy

Most term life insurance policies automatically include a term conversion rider that allows you to convert your existing term policy to a whole life policy. If yours doesn’t have one, or if you’re not sure if you have a convertible term life insurance policy, talk to your insurance company.

Converting a policy requires contacting your insurance company and completing some forms. Here are a few other things to know beforehand:

You can only convert a policy during the conversion period

The conversion rider of your policy will specify a conversion period, or a time frame in which you are eligible to convert your policy. Generally, the conversion period starts one to five years after your policy is active, and ends either when term expires or when you reach a certain age (usually between 65 and 70).

The length and exact dates of the conversion period vary from insurer to insurer, so be sure to check your individual policy’s guidelines.

You can choose to convert just part of your term policy

Insurance companies may offer partial conversions in cases where you want to extend your life insurance coverage but don’t need as large of a death benefit.

Say you currently have a $500,000 term life insurance policy that you want to convert to a whole life policy. Because the premiums on a $500,000 whole life policy might be prohibitively expensive and you might not need as much coverage later on — it might not make sense to convert the entire policy.

In this case, you could opt for a partial conversion. For instance, if you choose to convert 50% of the policy, $250,000 of the policy would be converted to a whole life policy, but the other $250,000 would remain an active term policy until the end of the term.

How much it costs to convert a policy

When you convert your term policy to a whole life policy, the conversion process itself won’t cost anything. However, because whole life insurance is usually around five to 15 times more expensive than term life insurance, be prepared for your premiums to increase significantly after the conversion.

You may be able to offset some of the costs of moving from term life to whole life by opting for a partial conversion, or taking advantage of any conversion credits your insurer offers.

Term conversion credits

Some companies offer a term conversion credit that reduces your premiums for the first year (sometimes more) of the conversion. Though this type of discount may take some of the sting out of the initial premium increase, keep in mind that after the discount period, you’ll be charged the full amount for your new whole life premiums.

Alternatives to life insurance conversion

Purchase a new term life insurance policy

Given the steep cost of whole life insurance, it’s possible that taking out a new term policy at the end of your existing term might be a cheaper option than converting your policy. Though applying for a new policy will require going through the underwriting process again, you could potentially save yourself hundreds of dollars in premiums each year, depending on your age, your health, and how much longer you think you’ll need life insurance coverage.

You should compare quotes well in advance to determine if buying a new term policy will be cheaper then converting your current policy — that way if it isn't, you still have time to convert.

Use the ladder strategy to “stack” term life insurance policies

Another option to explore if you’re seeking partial coverage is buying multiple term life insurance policies that expire at different times, known as the ladder strategy. This method doesn’t involve policy conversion, but rather stacking, or laddering multiple term life insurance policies that expire at different times so you don’t pay for more coverage than necessary. If you go this route, you’d want to put it in place well in advance of the term conversion window kicking in. 

Frequently asked questions

How much does it cost to convert term to whole life insurance?

The conversion cost itself is $0, but your premiums will drastically increase by fve to 15 times if you switch from a term life to a whole life policy.

What does it mean to convert a life insurance policy?

Switching from a term life insurance policy to a whole life insurance policy. Because term life insurance policies expire after a certain period (the term), people seeking additional coverage may opt to convert their existing policy to permanent or whole life insurance.

How do you convert a life insurance policy?

First, contact your insurance company to confirm you have a convertible term life insurance policy and that you’re within your policy’s “conversion period.” Then, decide how much coverage you need (most companies offer partial conversions so you might not want to convert your entire policy). Finally, fill out some conversion forms with your insurer.