Hidden Benefit In Your Term Policy?...

Remember that old Term Life Insurance policy you have been paying on over the last ten to twenty years to protect your family while the kids were young? Maybe you have been thinking of letting it lapse because the premium was going to increase at the end of the term. If you have had any medical problems since signing up for your policy, such as a heart attack, stroke, cancer, or any number of conditions, you might want to reconsider dropping this policy. Your term policy may contain an underutilized provision that will allow you to transition your death benefit into a permanent life policy without having to be medically underwritten. This provision is called a conversion privilege. It is important to note that it is likely this provision will end sometime before the end of the term policy. You can find the definition of your provision in your insurance policy.

Term Insurance has always been a relatively inexpensive way for individuals to protect their family in the event they pass unexpectedly. Generally, once their children have left the nest parents would see that their policy was expiring and let it lapse. With a little forward thinking, there might be a better way to utilize that expiring Term Policy. Ideally, the policy will expire at or near the retirement phase of the insured. Once the retirement budget has been set, it might be time to think about whether or not you would like to leave a legacy/life insurance to your children and grandchildren. Some people leave a legacy because they believe their children will need it and some just would like to make their lives a little easier.   

Once the decision has been made to leave a legacy, the next step is determining whether to purchase a new policy and be underwritten or to convert that old term policy. If you have any serious medical conditions more than likely you will be better off using your conversion privilege. Converting your old policy will avoid underwriting and may even let you convert at the preferred medical rate that you qualified for at the start of your old term policy! 

The Term Conversion Privilege is an important part of a term policy. There are term policies that do not include that provision.  Personally, I would avoid those policies and think about reapplying for a new policy if it was recently purchased.  The flexibility of being able to convert creates planning opportunities in the future. Before you let that old Term policy lapse, consider how conversion might work for you.

If there is a topic you would like to have addressed email me at jclark@brookstoneadvisor.com and maybe I will make it my next article.