How & Why to Convert Term Life Insurance to Permanent Life Insurance with Liahona Insurance & Wealth Creation Inc.
Term life insurance is an affordable way to provide a financial safety net for your loved ones who may count on you for support. It costs less than permanent life insurance because it provides coverage for a specific term in our lives, often 10 or 20 years. It also costs less because you are merely renting the insurance vs. owning it. Term life insurance does not have a cash value component like permanent does. Once the term is over it can be renewed for another term but the cost goes up because you are older and the risk for the insurance company is higher, but once the policy is cancelled or becomes unaffordable then there is no coverage in place for the future to meet your long-term estate transfer goals and tax liabilities upon death.
Permanent life insurance on the other hand is an asset. The cost is higher because you are paying to have insurance for the rest of your life, and because there is a cash value component that grows within your policy as an investment portion. This cash value is something that you may wish to use in retirement or borrow to start a new business or help your kids through college. It is your money and is accessible to you in many different ways.
How do you convert Term Life Insurance to Permanent Life Insurance?
Conversions are much simple than you may think:
First, check the language of your policy to see if conversion is an option.
Check the term conversion period, and the time frame during which you are able to convert.
It is typically one document to make the conversion, you simply fill out the questionnaire and your permanent policy will be issued in a few days.
You do not have to undergo any additional underwriting as it is a conversion and not considered a ‘new policy and you have already qualified under the original term policy.
There is NO cost of converting, only an increase to the annual premium.
Reasons to convert Term Life Insurance to Permanent Life Insurance?
You have just had a health change: Conversions allow you to change your policy to premium without doing any additional underwriting, this can be valuable if your health worsens and locks in your insurability for life.
Your budget has changed: You may have considered buying permanent insurance from the beginning but could not afford the higher premium, if you are making more money now, your estate liabilities are higher or you want to make sure that you leave all that you can to your beneficiaries, this may be the right time to make a change.
You want a cash value asset: One of the benefits of Permanent insurance is that part of your premiums go toward the cost of insurance and the other part goes towards building cash value. Some people want the cash value in their policy to access in retirement or for other reasons, this is tax-free growth.
You want to leave a legacy: If you want to be able to leave an inheritance to children, charities or other beneficiaries then a permanent life insurance policy will ensure that this happens.
Please contact me at Liahona Insurance & Wealth Creation Inc. to see if a Term to Permanent Life conversion is right for you. https://liahonainsurance.ca or brenault@liahona.ca.
