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Life Insurance

How to Convert Term Life to Whole Life Insurance


Most people choose the type of life insurance policy they want based on the phase of life they’re in at the time. It’s only natural that your policy needs evolve alongside your plans and goals. Whatever the reason may be, if you’re looking for something more permanent, converting term life to whole life may be right for you.

Many term life insurance plans have conversion options built into policy provisions, and in those cases, term to whole conversion can be pretty simple. However, you should be sure to do your homework before making the decision to switch. Read on to learn everything you need to know about switching from term to whole life.

Why Should I Convert to a Whole Life Policy?

There are several good reasons for converting term life to whole life. If you’re still relatively young and healthy, your whole life rates may be much lower than they will be later in life. This means you can lock in a premium that never changes, saving you money in the long term. Additionally, the younger you are, the longer you have to build cash value on your policy, which can help you save money for retirement or other large life expenses faster.

If you are older, it’s better not to let your term life policy expire at the end of your term. Term to whole life conversion can ensure your spouse, dependents, or other loved ones are provided financial support after you’re gone. Even if you decide to reduce the amount of insurance you carry, converting your term policy can at least help your loved ones cover your final expenses, such as funeral costs and possible medical bills.

Helpful Tool: Calculate Your Life Insurance Needs

How Much Does It Cost to Convert a Policy?

Although there are usually no additional fees to convert a term policy to whole life, you will pay more in premiums to maintain the same amount of coverage you have with your term policy. To lower the costs, you can choose to convert part of your term policy, or you may have conversion credits depending on your insurer.

A conversion credit is a discount that reduces your premiums for the first year (or more) to help ease your transition to paying the premium of your new whole life policy. Once the discount period is completed, your rate increases to the full amount. However, with whole life policies, your rate will never increase again after the initial adjustment, and your new higher premiums are building a cash value that you own.

Converting term life to whole life will likely be less expensive than simply taking out a new whole life policy. In most situations, there is no underwriting involved, so you do not need to have a medical exam or complete a health or lifestyle assessment. Taking out a completely new whole life policy will require underwriting, and if you’ve developed health issues, your premiums will reflect that — assuming your application is even accepted.

How to Convert Your Term Policy to a Whole Life Policy

The process for term to whole conversion depends on your current term policy and the whole life policy you wish to obtain, so you’ll need to speak with your insurance provider. Term life policies with a conversion rider allow you to convert your current term policy to a whole life policy without requiring a physical exam, application, or other underwriting considerations.

Here are some additional considerations to note:

  1. Term policies with conversion riders can usually only be converted during a defined “conversion period.” This could be anywhere between one and five years after your term policy is in force and ends when the term runs out or when you reach a specified age, typically between 65 and 70 years old.
  2. You may be able to convert all or part of your term policy. Depending on your age, your budget, and your insurance needs, you may not wish to convert your entire term policy to whole life, either because it’s too expensive because you need less insurance coverage or both. If you convert a percentage of your term policy to whole life — say 20% of a $500,000 policy — the remaining 80% would remain in your term policy, leaving you with a $100,000 whole life policy after your term expires.

Learn More about AAFMAA’s Term to Whole Conversion Process

At AAFMAA, we offer a variety of whole life insurance options designed specifically for servicemembers and Veterans. To learn more about converting term life to whole life, contact an AAFMAA Life Insurance expert at 866-716-4579 or email [email protected].