Term Life Insurance Articles
Deciding Whether Convertible Life Insurance Is Worth The Extra Cost
2010-02-08
Traditional term life insurance policies provide great protection, but they've got one major drawback. At the end of the term, any money that a policy holder has paid as premiums stays with the insurance company--there's no return. As such, term life insurance isn't a great investment for many consumers. However, some term policies allow premiums to be applied to a new "whole life" policy at the end of the term, which eventually results in a return for the policy holder. Of course, there's a catch. These convertible policies cost more than a typical term life policy, sometimes by quite a bit. For that reason, it's important for buyers to weight the costs and benefits of convertible plans before purchasing one.
The best way to go about this is to get a range of term life insurance quotes, some convertible and some level. Look for the same coverage amounts, and simply compare one term life insurance quote to the other. Think about how much money you can realistically afford to spend on life insurance. Remember, missing a payment or two on a convertible policy could cause you to lose your ability to change the plan into a whole life policy. It's sometimes a better idea to purchase a low-cost, affordable level policy rather than take such a risk.
You should also think about whether you'd actually need a whole life policy. Every consumer would like to get premiums back at the end of a term life insurance policy, however, sometimes that consumer could see a bigger return on investment by putting money into a retirement account. This is especially true of younger buyers. For instance, a Roth IRA will certainly provide a better source of retirement investment than a whole life insurance policy. For many young policy holders, the best strategy is to buy a standard term life insurance policy and begin a separate investment in such an account. However, you should consider how much money you'll have to invest (or pay towards insurance) and weigh the payouts carefully to see if this is true in your case.
Whenever a consumer makes a decision about term life insurance, he or she should keep the term length and cost in mind. Convertible term life insurance is sometimes well worth the cost, but it's a serious investment--careful calculation is important. Speak to a life insurance agent, and never rush into a policy. By gathering quotes and considering alternatives, you can make a well-informed decision that ensures great coverage and a good investment strategy for your future.
