Converting your term life insurance to whole life insurance is fairly simple. The first step is to contact your insurance company to learn more about your options. If you bought your life insurance policy through Policygenius, we can help walk you through next steps, too.
Can you convert your term life policy to whole life at the end of the policy?
Whether you can convert your policy or not depends on your insurer’s conversion options and guidelines.
Many insurance companies offer convertible term life policies that allow you to convert to a whole life policy or another type of permanent life insurance before the end of the original term.
Some insurers also only let you convert your policy under certain circumstances.
While your initial term is still active — in other words, any time before the end of the term.
If our policy has been active for at least one full year.
If you’re younger than a certain age — usually 65 or 70.
Where can you find your insurer’s conversion guidelines?
Your insurance company’s conversion guidelines for the specific policy you own should be in your policy documents. You might have a hard copy of these documents, but if you bought your policy in recent years, you likely have an electronic copy as well.
You can also call your insurance company directly to ask about guidelines for your policy. If you bought your life insurance through Policygenius, our team can still help you with your active policy, too.
When does it make sense to convert a term life insurance policy to whole life?
Term conversion isn’t the best fit for everyone, but it might make sense under certain scenarios — for example, if your budget, health, or financial priorities have changed.
Your budget has changed
If you have a higher budget than when you first bought your policy, you may consider converting to whole life. Whole life rates — and other permanent life insurance rates — are significantly more expensive than term life rates because these types of policies don’t expire and come with a cash value savings feature.
If you wanted to buy permanent coverage for your loved ones in the first place but couldn’t due to budgetary restrictions, converting your policy now makes sense.
Your health has changed
If you planned on buying a separate whole life policy in the future, but now you have a health condition that would make this option more expensive or even more difficult to get approved for, it might make sense to convert a portion of your existing coverage.
When you convert your term life policy, you don’t have to take a new medical exam or answer qualifying health questions, so your premiums won’t be impacted by any recent health changes (as long as you’re not requesting to increase your coverage).
You want to leave an inheritance to your loved ones
If your financial priorities have changed, or you’ve retired recently, you may prioritize providing an inheritance to your loved ones instead of protecting your income with a term policy. Converting to a permanent policy can guarantee that you’ll leave a legacy to your family regardless of when you die.
The insurer pays the life insurance proceeds directly to your beneficiaries, so it doesn’t have to go through probate court when you pass away, which speeds up the process for your loved ones claiming the money. This makes a life insurance death benefit ideal for providing an inheritance.
You have lifelong dependents
If you have dependents who require lifelong care, you may need coverage that won’t expire, so you can guarantee funds to support them when you’re gone. Converting your term policy to a permanent one can give you the peace of mind that your beneficiaries will be taken care of regardless of the time of your death.
Learn more about buying life insurance for a child with a disability
You want a cash value asset
Whole life policies come with a cash value feature, which acts as an investment component that earns interest at a set low rate over the life of the policy. Unlike the life insurance death benefit, you can access your cash value while you’re living.
Some people like to use their life insurance cash value in addition to traditional investment accounts like Roth IRAs and 401(k)s. Converting your term policy to whole could be a good fit if you’ve exhausted your pre-tax investment options and are looking for ways to complement your retirement portfolio.
You want to leave final expense funds
If you have less of a need for term life insurance — maybe you paid off your mortgage, or you no longer have children who are financially dependent on you — you may prefer to have a smaller amount of permanent coverage that’s guaranteed to help pay for end-of-life expenses, like a funeral.
If that’s your case, converting part of your term policy to a permanent policy can help secure funds for end-of-life costs.
Some insurers have a minimum coverage amount they allow for conversion, so you’ll need to check that stipulation before converting. Otherwise, it might make sense to purchase a separate final expense life insurance policy.
If you’re not certain if you should convert your term life policy, you can speak with a financial professional or a licensed life insurance agent.
How much does it cost to convert term life to whole life insurance?
The conversion itself doesn’t cost anything, but your premiums will increase if you convert your term life policy to whole life.
For instance, a 40-year-old female with few health conditions could pay $35.27 per month for a $500,000 term life policy lasting 20 years, whereas the same person could pay $588 per month for a $500,000 whole life policy that doesn’t expire.
Even if you lower your coverage amount when you convert, you’ll likely pay more in premiums than you did before. It’s important to work with a life insurance agent who can give you specific estimates on how much you’d pay before you decide to exercise this option.
Learn more about life insurance rates
What to consider before converting term life to whole life insurance
Your policy options
Before you consider if you want to convert your policy, you’ll need to check if your insurer offers this option. Most companies do, but insurers have different stipulations for when you can convert.
For example, some insurance companies only offer conversion for certain kinds of policies. Or one insurer might let you convert from term life to whole life insurance, but another may only offer conversion from term life to universal life insurance — another type of permanent coverage that lets you adjust your premiums and death benefit, but doesn’t always offer guaranteed returns, like whole life.
Your budget
Your premiums will likely increase if you convert to whole life insurance, so it’s important to consider your budget first. This will help you ensure you can afford the premiums to keep the policy active and prevent your coverage from lapsing and leaving your loved ones without the financial protection you intended for them.
Your coverage needs
Before you convert or otherwise change your coverage, consider how much life insurance you need and how your financial obligations have changed since you first bought your policy.
For example, you might have paid off your mortgage, so you may no longer need term life insurance to cover your debts. Instead, you might just need a small amount of coverage to help your beneficiaries when you’re gone.
Learn more about how to buy additional life insurance
How to convert your term life policy to whole life insurance
It’s fairly easy to convert your term life policy to whole life.
Alternatives to converting term life insurance to permanent life insurance
If you know you want to update your coverage but you’re not certain term conversion is right for you, you have a few options.
A partial conversion
You don’t have to convert your full coverage amount if you don’t need it. For instance, if you have a $500,000 term life policy but you no longer need the whole coverage amount, you could choose to convert only $250,000 in coverage instead.
Some insurance companies have a minimum coverage requirement for conversion (for example, $100,000) so this is another example of when you’ll need to check your insurer’s guidelines before making a decision.
A new term life policy
If you’re approaching the end of your term and you still have temporary coverage needs, a new term life policy could also be a good — and potentially more affordable — option. If you still have dependents or debt that you’d want to cover for your loved ones but don’t want to invest in, or have the budget for, a permanent policy, it might make sense to apply for a new term life policy instead.
You could also apply for a shorter term than your original coverage — for example, if your 20-year term is expiring and you have 10 years until retirement, a 10-year term might be more than enough.
Learn more about what happens if you outlive your life insurance
A final expense insurance policy
If your primary goal is to cover final expenses for your family (including funeral costs) and you only need a very low coverage amount, you could apply for a final expense insurance policy.
If your insurer has a minimum coverage conversion amount of $100,000 but you only want $10,000, a new final expense policy could be a better and cheaper option than making a partial conversion of your existing policy.
There are also different types of final expense policies, including simplified issue and guaranteed issue, that you could consider instead of converting. An independent broker can help match you to the policy that’s the best fit for your overall profile.
Other types of term life insurance
Frequently asked questions
What happens when you convert term life to whole life insurance?
If you convert term life to whole life insurance, you’ll contact your insurance company to complete the paperwork before your coverage becomes permanent. Your premiums will also increase.
Is it wise to convert term life to whole life insurance?
It depends on your personal financial situation, your health status, and your budget. Converting term life to whole life can make sense if you have a need for permanent coverage and a higher budget than when you bought your term life policy.
Should you convert your term life into whole life insurance?
It depends on your financial situation and your insurance needs. If you have a higher budget, you’re looking to guarantee an inheritance for your loved ones, or you have a permanent dependent, it might make sense to convert to whole life. A licensed life insurance agent can help you compare options.
What do you gain by converting term life to whole life insurance?
If you convert to whole life insurance, your premiums will increase, but your coverage won’t expire.
Can you convert whole life to term life insurance?
No. Many term life policies offer you the option to convert to whole life, but whole life policies don’t offer you the option to convert to term life. If you’re in this situation, you could consider surrendering your whole life policy and replacing it with term life — but make sure you speak with a licensed agent before you do so, since you could face surrender fees.
