Here’s an example. Let’s say you own a term policy with level premiums for 30 years. At some point during this time you are diagnosed with a serious health issue that would normally result in high premiums or even a decline of coverage. With good conversion options, you will be able to convert part or all your term policy into a permanent policy without evidence of insurability. Not every company has good conversion options. This is a most important feature and the least understood benefit of term life insurance. You will not find this information on the typical website, nor will you find it on the quote forms that are generally provided by these sites.
Before you by any term life insurance, make sure to speak with an independent agent (someone with access to many carriers) and ask about the specific conversion of the recommended coverage. High quality carriers do not necessarily charge more or have stricter underwriting requirements.
Other insurance types fall into the permanent category.
This coverage is designed to stay in force for the lifetime of the insured, and includes whole life and universal life policies. Today, most whole life policies are for small amounts of coverage. Sometimes called “final expense” insurance, they are designed for easy acceptance and generally cover individuals for $25,000 or less.
For amounts over $25,000, a universal life policy with lifetime level premiums is the least expensive permanent coverage. Unlike whole life, this type of universal insurance is intended to pay the death benefit only. Because it does not generate any meaningful cash value, premiums are lower than whole life. A side benefit is the ease in which policies may be compared because all premiums are level and guaranteed.
Whatever type and amount of coverage makes sense for you, don’t be shy about asking questions of your agent. Good agents are a valuable resource that can help you understand your need and address the best way of meeting your requirements.
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