Convertible term life insurance can be a reliable solution when you are deciding between a term and a whole life insurance policy. Term provides coverage that lasts for a set period of time to fit the budget for the time being. Whole life is permanent; it provides you with protection for life as long as you pay your premium when due —and your premium stays the same for as long as you keep your policy. Convertible life insurance gives you the opportunity to update term coverage to permanent. A decision to go with term does not have to be final; New York Life makes it simple for policy owners when they are interested in converting1 term life insurance into permanent life insurance as their careers advance and they can afford higher premiums.
Convertible term life insurance essentially gives you the option to change your type of insurance coverage as your life changes. Here are some of the flexible benefits of converting term life insurance:
Many people decide against getting life insurance or select the minimum amount of coverage in order to avoid the mandatory medical exam. When you convert your New York Life term policy to permanent coverage, though, it can often be done easily and generally without another medical exam, if you convert within your conversion period as defined by your policy. Additionally, your new permanent policy premium will be based on the rate class from when you originally purchased your term coverage and had a medical exam. The cost difference can be significant if you’ve had term coverage for a while and are now several years older.
Term life insurance provides adequate coverage, but there’s an expiration date on the policy, and premiums can increase substantially when it’s time to renew. Term coverage is an ideal choice when you have significant obligations that have an end date—like paying off the mortgage or seeing your children through college. For these situations, a term policy that ends shortly after your obligation ends is perfect. Whole life is needed for obligations that will not end—to your spouse, for example, or if you want a legacy for your children and grandchildren. Making sure your family is protected is crucial when your children are young. Term may better meet the budget, so if money is an issue, term is the way to go for pure protection for a known time period. But gradually converting some or all of your term to whole life will give you the peace of mind that comes with knowing that your family will always be protected if something happens to you, and you will no longer have to be concerned about the expiry date of your term life insurance policy.
Premiums are higher for permanent life insurance, but there is a significant upside: Cash value accumulates in the policy and grows tax-deferred. Whole life policy owners are also eligible to receive dividends. Dividends are not guaranteed, but New York Life has paid dividends every year since 1854. They can be taken in cash, used to help pay premiums, or used to purchase more insurance (which will also be eligible for dividends). And the cash value of your whole life policy can be accessed2 to help with major expenses, like college tuition or a down payment on a house.
New York Life has a number of whole life insurance solutions to choose from. When you convert, you can decide on the amount of whole life you can afford and keep the remainder of your term coverage in place, so you don’t find yourself underinsured. Keep in mind that your premiums will increase when you eventually convert your full coverage to whole life. If you convert earlier, though, you’ll have more time to accumulate cash value within the policy.
Term coverage is popular because it’s less complex and more budget friendly than permanent insurance. You may think it’s all you’re going to need. But bear in mind that your health and your needs may change. And if they do, the option of converting term life insurance to a whole life policy will be valuable.
If you’re unsure about whether term or whole life coverage is right for you, or if you’re considering convertible life insurance, connect with a New York Life financial professional to learn more about your options.
1 Subject to certain conditions and limitations.
2 Accessing cash value reduces death benefit and available cash surrender value.