Convertibility is a very important issue involved with term life insurance.

A conversion option means that you can purchase a permanent life insurance plan based on your original rate category. This is true even if you have serious health problems at the time that you want to convert.

Convertibility is crucial if your health deteriorates and future purchases of insurance would be too expensive.

The big benefit to this is that you can do so without any evidence of insurability. With no required medical exam you could complete the conversion, even if diagnosed with a terminal illness. Nearly 99% of all life insurance owned in the United States is Term Insurance. There are situations, however, where permanent insurance makes financial sense.

We recently had a case where a client had decided to purchase a life insurance plan, which had a ten year rate guarantee because it was less expensive. He had a need that was more than 10 years, having 3 young children, but assumed he could buy another inexpensive term policy when that one expired. He survived 2 cancers in one year in the 9th year of the policy. He was only 49. Thankfully, he exercised his option to “convert” the term to permanent coverage before the 10th year and kept his coverage in force. Had he let it lapse he would have been uninsurable.