Shopping around to find the right life insurance policy can be somewhat overwhelming. Some policies have added benefits that you might accidentally give up if you don’t understand what you are buying. To help you decide on the right product for your needs, we’ve compared convertible term life insurance to guaranteed renewable term life insurance.

 

What is a guaranteed renewable term life insurance policy?

Term life insurance offers a specified death benefit, and a level cost of coverage for 10 to 30 years depending on the insured's age. A guaranteed renewable term life insurance policy offers the insured an option to continue their coverage even after their initial term has ended, regardless of their current health.

However, one thing to be wary of with this type of insurance is that the premium will increase after your initial term has ended. Also, most of these policies will stop offering renewable coverage after age 95.

 

Who benefits from guaranteed renewable term life insurance?

Guaranteed renewable life policies offer guaranteed insurability after your term has ended, even if you are in poor health. With some term life insurance companies, this is a free added benefit, or “rider,” that is included with every policy they sell. This is a great benefit to most consumers, especially if they become terminally ill or develop a health condition that prevents them from qualifying for a new life insurance policy.

 

What is a convertible term life insurance policy?

Convertible term life insurance is just like traditional term insurance. Both types of policies work the same except for one key feature: convertible term policies include a free “rider” that allows the insured to convert their term policy into permanent coverage. This benefit is available to the insured regardless of their health, but your policy much is converted before your term ends, and usually before the age of 70.

Convertible term policies will allow you to convert all your coverage (or face amount) into permanent life insurance, but the cost is significantly higher. If your needs have changed, or if you have a fixed budget, you don’t have to convert your entire policy. Most companies will allow you to convert as little as $50,000 of coverage into permanent insurance before your policy’s term ends.  

 

Who benefits from convertible life insurance policy?

Managing your finances while you are young is always an excellent idea, but make sure you understand what you are buying. A convertible life insurance policy can prevent you from being without insurance later in life, and it shouldn’t cost you more than a traditional term policy that doesn’t offer this free added benefit.

When you do convert your insurance to a permanent policy, you won’t have to reprove your insurability, take an exam, or answer questions about your health. For some people, this benefit can be invaluable, especially if their current health prevents them from qualifying for a new policy.

A convertible life insurance policy gives you greater flexibility for the future, and most importantly, it’s a free benefit with many companies. If you want the option to convert some or all of your term coverage into permanent life insurance before your term expires, make sure this free benefit is automatically included with your policy before you apply.

Cliff Pendell is the author of the above article

Published by Zachary McGavin