Did you buy a term life insurance policy to get you through your younger years when you had a lot of debt and little savings? Chances are you were trying to protect your young family against the unexpected. If you’ve made it through that period and your term life insurance is about to end, you might find it beneficial to convert your policy to a whole life policy.
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The time you have to convert your policy depends on the insurance company’s rules. It’s important to discuss the options with your insurance agent long before your policy is set to expire.
Just why would anyone want to continue their policy? Keep reading to learn the top reasons you may want to consider switching.
You Can Build Cash Value
Some of the premium you pay towards your whole life insurance policy goes into a cash value account. This account grows over time, giving your life insurance policy cash value. If you need to use the cash at some point while you are still alive, you may be able to borrow against the policy. If absolutely necessary, you can even turn the policy in and take all of the cash value, but then you don’t have an insurance policy any longer.
You Don’t Have to Convert the Full Policy
You may be able to convert less than the full amount of the insurance coverage. Base it on your needs. If you need just a little help with your retirement funds, convert a small portion of your term policy into a whole life policy. This helps keep the premium affordable, while helping you build some cash value.
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You Don’t Need a Medical Exam to Qualify
Unlike a brand new insurance policy that would require a medical exam, you can convert a term policy into a whole life policy without the medical exam. This is a great benefit for those whose health has failed since they took out the insurance. If you know you wouldn’t qualify for new insurance, converting is the next best option.
You Don’t Have a Term or Expiration Date
Whole life policies are also known as permanent life insurance policies. In other words, you get permanent coverage for as long as you stay alive. This is in stark difference to term life insurance, which usually has a period of 10, 20, or 30 years. If you are still alive after the term expires, the policy is worth nothing. If you want new insurance, you have to reapply, unless you convert your policy before it expires.
Whole Life Insurance Can be a Good Retirement Supplement
If you’ve maxed out your contributions in your employer’s 401K and your IRA, whole life insurance can give you another savings vehicle for retirement. You get similar tax advantages, and may be able to supplement your retirement income when it comes time to use that money. You’ll have to check with your insurance agent to determine if you are eligible to do so, though.
It’s an important decision when you decide to convert your term life insurance policy into a whole life policy. Talk with your insurance agent about the costs, benefits, and risks of such a policy. Then you can decide if it’s the right choice for you.
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