Term Life Insurance Articles
4 Reasons That Convertible Term Life Insurance Isn't For Everyone
2010-03-10
A convertible term life insurance policy can be a great buy. It offers the protection of a typical term life insurance policy with some added investment potential. If you keep up with a convertible policy's minimum payments, you'll eventually be given the opportunity to convert it into a whole life insurance policy, which will start out with all of the premiums that you'd paid into the old policy. Whole life insurance policies are different from term life policies, as they allow policy holders to get their premiums back after they reach a certain age (usually 65 or so). However, while convertible policies certainly have their benefits, they have disadvantages, as well, and they're not the best policy type for some consumers.
First of all, convertible term life insurance costs far more than standard level term life insurance. This is because in a standard policy, if the policy holder doesn't die within the term, the insurance company keeps all premiums paid into the plan. Therefore, insurers stand to benefit far less from a convertible policy, and they charge customers more as a result. Rates vary greatly from company to company, and you'll need to get a term life insurance quote to compare to the rates for convertible policies in order to see exactly how much more expensive convertible plans are. In every case, though, they'll be significantly more expensive than level plans. The difference may be too great for many consumers who are looking for a cheap way to protect their beneficiaries.
Also, some consumers simply don't need the investment opportunities that a convertible policy provides. If you've already got an IRA or 401k, you might already have post-retirement costs covered, and money spent on relatively low-yield whole life insurance could potentially be wasted. It's always good to get your premiums back at the end of a policy, but many people buy term life insurance coverage as a sort of failsafe protection, not as a form of investment. Besides, convertible policy holders need to have good payment histories in order to convert at all, and the cost of a new whole life insurance policy could be massive compared to the term portion of the policy.
As such, it's best to do your research before rushing into convertible life insurance. Gather as many term life insurance quotes as possible, and consider all of the different types of policies--not just one or two. Life insurance is a big purchase, and the decision to buy a policy shouldn't be made on a whim. By looking at policy types and coverage levels, you'll develop a plan that works within your budget. Both your pockets and a peace of mind make for a better life.
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A convertible term life insurance policy can be a great buy. It offers the protection of a typical term life insurance policy with some added investment potential. If you keep up with a convertible policy's minimum payments, you'll eventually be given the opportunity to convert it into a whole life insurance policy, which will start out with all of the premiums that you'd paid into the old policy. Whole life insurance policies are different from term life policies, as they allow policy holders to get their premiums back after they reach a certain age (usually 65 or so). However, while convertible policies certainly have their benefits, they have disadvantages, as well, and they're not the best policy type for some consumers.
First of all, convertible term life insurance costs far more than standard level term life insurance. This is because in a standard policy, if the policy holder doesn't die within the term, the insurance company keeps all premiums paid into the plan. Therefore, insurers stand to benefit far less from a convertible policy, and they charge customers more as a result. Rates vary greatly from company to company, and you'll need to get a term life insurance quote to compare to the rates for convertible policies in order to see exactly how much more expensive convertible plans are. In every case, though, they'll be significantly more expensive than level plans. The difference may be too great for many consumers who are looking for a cheap way to protect their beneficiaries.
Also, some consumers simply don't need the investment opportunities that a convertible policy provides. If you've already got an IRA or 401k, you might already have post-retirement costs covered, and money spent on relatively low-yield whole life insurance could potentially be wasted. It's always good to get your premiums back at the end of a policy, but many people buy term life insurance coverage as a sort of failsafe protection, not as a form of investment. Besides, convertible policy holders need to have good payment histories in order to convert at all, and the cost of a new whole life insurance policy could be massive compared to the term portion of the policy.
As such, it's best to do your research before rushing into convertible life insurance. Gather as many term life insurance quotes as possible, and consider all of the different types of policies--not just one or two. Life insurance is a big purchase, and the decision to buy a policy shouldn't be made on a whim. By looking at policy types and coverage levels, you'll develop a plan that works within your budget. Both your pockets and a peace of mind make for a better life.
