On a Term Life Insurance policy, What does the conversion clause maen?

Question

On a Term Life Insurance policy, What does the conversion clause maen?

Answer 1

"Conversion" means that the policy can be "converted" to a Whole Life insurance policy.  Whole Life polices are sometimes used as an investment.  They gain or hold value.  One can even take loans against the policy's value.

There are better investments.  If you need whole life, then that's OK.  If you just need insurance, look at term and invest the difference.

I hope this helps.

Answer 2

Conversion is the right to take out a new permanent policy without re-proving your insurability to the same company.  It is a way to build flexibility into your life insurance plan without worrying about a change in your health.  The convertibility clause typically expires at a specified age (ie 60 or 70); check your policy to be sure.  Most competitive term companies include this feature in their policies now.

Let's say you are 35 now and plan on needing life coverage for 15 more years.  At age 50, you realize that you still need 7 more years of coverage (because your crystal ball was broken when you were 35).  It is sometimes less expensive to convert the policy than to renew it at a higher rate.  

If you need permanent coverage, but have not had a significant change in health, you should consider conversion along with the other offerings in the open market at that time.  A little bit of shopping could go a long way.