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Posted on June 25, 2009 by Denise | Posted under Insurance
A Convertibility Option and Why It’s Important
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Term life insurance is a very popular choice of insurance largely due to its relatively inexpensive premiums and its comparatively generous death benefits. Unlike permanent life insurance, there is no cash value built up. When choosing a term life insurance policy, there are a few things to keep in mind. Always ensure that it is a "guaranteed level term" life insurance policy where the premiums are designed to remain level for a period of 5, 10, 15, 20, 25 or even 30 years. If this is not specified, the insurance company can surprise you by raising your premiums at any point of time during the term. Other important factors to consider are the renewability and convertibility options available on term life policies. With a renewability option, your policy can be renewed for a limited number of additional years without a medical exam, at the end of the term of your original policy. However, the premium will increase with each renewal and these might be expensive in the long run. This option is important in case you have recently suffered a decline in health and would benefit from renewing your policy without a medical exam, which might lead to exorbitant premiums or even non-eligibility from acquiring a policy. Convertibility is another option available with a term life insurance policy. The convertibility feature means that the term insurance policy can be exchanged for another type of life insurance usually at any time before the expiration of the policy's term. It simply offers you the option to convert a term life insurance policy into a permanent life insurance policy without a fresh medical exam or the need to prove that you are still insurable. When you buy a term life insurance policy, you in effect insure your life only for a fixed period of time – from one to thirty years. If you die within the term you have chosen, the insurance company will pay the death benefits to your beneficiaries but if you outlive the term, the insurance company keeps all your premiums and no benefits will be paid out to anyone. If you can convert your term life policy to a cash-value policy, you can ensure that death benefits will be paid out irrespective of when you die. By including a convertibility feature in your term life policy, your annual premiums will increase but it is a smart option to have especially if your health deteriorates during the term of your policy and no other insurer will then provide you with cash-value coverage at affordable rates. Some convertibility options are also allowed on an "attained age" basis. This means that you get to purchase a new permanent life insurance policy at the premium rate of your current age. With a convertibility option, you may be able to convert all or just a portion of your term life insurance policy before the end of the term period. The benefit in this case is that you can get a larger life insurance amount when you are younger and have a greater need for life insurance and can then convert some of that to permanent insurance to provide for your funeral expenses or estate taxes as required. Thus convertibility options can:
About The Author: About AccuQuote: AccuQuote is a leader in providing term life quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers. |
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