What is a Term Life Conversion Option?

Most term life insurance policies in Canada are convertible, but what exactly does that mean, “Convertible,” and what factors are important when considering this option?

A term conversion means that the insured can convert their term life policy to a permanent policy without a medical. This can be a big advantage if the insured’s health has changed since the original policy was taken out.

An example is a healthy male who takes out a 20-year term policy at age 40, but soon develops diabetes. If the insured were to take a new permanent policy, that person would likely be rated (charged a surplus premium) or declined the new policy outright.

Instead, the conversion features allow the insured to convert their coverage at the original policy classification, so the conversion does not factor in the diabetes diagnosis he has gotten since the original purchase. This could save him thousands of dollars over the life of his new policy.

Here are some factors to consider when looking at term life conversion features:

1. What age does the option expire? Most insurance companies have the option expire at age 65, but some companies extend it to age 70.

2. What plans are your term policies convertible to? If the insured’s insurance company does not have a good selection of plans to convert to, the conversion option looses much of its value.

3. Does the Term Conversion option allow the insured to convert at preferred rates? Preferred rates are given to individuals in very good heath with good family health history. Industrial Alliance and Manulife Financial both have preferred rates on their Permanent policies and offer conversions at preferred rates if the insured received preferred rates on the base policy. This is not the case with most companies, so that is quite the advantage.

For more details on term insurance in Canada, please contact us at 1-866-899-4849 or visit our Term Life Insurance Quote Page

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