Is It Worth Converting Term to Whole Life Insurance in Little Elm?

What does converting a term policy actually mean?

Many term life policies include a conversion option. It lets you trade some or all of your term coverage for a permanent policy from the same insurer without answering new health questions or taking a medical exam. Your health rating usually carries over from when you first bought the term policy.

The catch is the price. Your new premium is based on your age on the day you convert, and whole life costs much more than term for the same amount of coverage. That's because whole life is built to last your entire life and builds cash value along the way.

When converting makes sense

The strongest reason to convert is a change in health. If you've had a diagnosis since you bought your term policy, a new policy might cost a lot more or not be available at all. Conversion protects the coverage you already qualified for.

The second reason is a need that won't go away when the term ends. Term is designed to cover the years when people depend on your income. Some needs outlast those years.

• Your health has changed and a new application could be rated up or declined
• You support someone who will need help for life, such as a child with special needs
• You want money set aside for final expenses so your family isn't covering them
• You want a policy that builds cash value you can borrow against later
• You're close to your conversion deadline and still want some permanent coverage

When it usually isn't worth it

If you're in good health, converting can mean paying more than you need to. A new term policy, or a smaller permanent policy bought on its own, may cost less than converting the full amount.

Converting also doesn't help much if the reason you bought term is going away. Once the kids are grown, the mortgage is close to paid off and your savings can carry a surviving spouse, you may not need large coverage anymore.

Budget matters too. A whole life premium you can't keep paying does your family no good. A policy that lapses after a few years leaves you with less than you started with.

Deadlines and fine print to check first

Conversion rights don't last forever. Most policies set a cutoff, either a number of years into the term or a certain age, whichever comes first. Miss it and the option is gone, so pull out your policy before your term gets close to ending.

Insurers also decide which permanent products you can convert into. Some offer whole life, some offer universal life, and some limit you to one specific plan. The product you're allowed to pick may not be the best one on the market, which is worth knowing before you sign.

• Your conversion deadline, by date and by age
• Which permanent policies the insurer allows
• Whether you can convert part of the coverage instead of all of it
• How the new premium is figured and whether it stays level

A middle path: partial conversion

You don't have to choose all or nothing. Many policies let you convert a portion of your term coverage and keep the rest as term until it ends. That gives you lasting coverage for things like final expenses while keeping your premium manageable.

For example, you might keep most of your term coverage for the years the kids are still at home in Little Elm and convert a smaller slice to whole life that stays in place after they move out. We'll run the numbers both ways so you can see the premium for each option side by side.