What is convertible term life insurance?

If you’re looking for life insurance that offers flexible coverage, convertible term life insurance might be the right option for you. That’s because it offers low-cost coverage now while helping you keep your options open over the long term if you later want permanent life insurance, which has no expiration date.

Offering your loved ones security when you’re no longer here is the biggest reason we buy life insurance, and a convertible term life insurance policy can adjust to meet your needs over time. Here are the key facts to know about convertible term life insurance and whether it might be the right choice for you.

How does convertible term life insurance work?

Term life insurance lasts for a set period of time: typically, 10, 20 or 30 years. Then it will expire if the policyholder is still alive. Convertible term life insurance includes a rider or conversion privilege that allows you to update your policy to have permanent coverage that lasts until the end of your life. If you choose to convert your policy, you can still keep the health rating you had when the policy began. Upon converting to whole life insurance, your premiums may change, but you will be protected for life, and your death benefit may remain the same.

To convert your term life insurance policy, you can contact your insurance agent to find out which options are available to you. Some policies are convertible only within a specified period of time, and some may require the addition of a rider to your contract. 

Nationwide's Guaranteed Level Term policy can be converted to offer permanent life coverage. However, Nationwide Life Essentials does not have the option to be converted to permanent life insurance.

Benefits of convertible term life insurance

This type of policy offers several different benefits, including:

• Flexibility to begin with a lower-cost term policy and then switch to whole life coverage on your own timeline as your needs change
• No additional medical exam or information needs to be provided when you switch to whole life coverage
• Potential for lifetime coverage with additional benefits, such as cash value
• A secured, set cost, regardless of how your age or health changes
• Financial advantages, such as borrowing against your policy’s cash value if you convert to permanent coverage, paying premiums from your policy and the ability to surrender your policy for cash to support your retirement

Why consider converting to whole life insurance?

There are some popular reasons why switching your coverage to whole life insurance might make sense:

Your dependents rely on you for financial support

The unexpected can happen and you may find yourself in a situation where your loved ones are dependent on you for longer than you expected. If you have aging parents or children who need additional care, you may need coverage longer than your initial policy provides. You can help provide for your loved ones’ needs in these situations by converting your term policy to whole life insurance.

You have outstanding debt

Usually you can convert your term policy for free, but some providers may charge a fee for the addition of a conversion rider. Upon conversion, premiums will probably increase based on your age. However, your provider may offer a partial conversion or a term conversion credit to help with offsetting costs.

You have a health condition

As your age and health changes, the cost of life insurance can increase. But if you have a convertible term life insurance plan, you can benefit from lower costs because your policy was purchased at a younger age. Converting to whole life insurance can help offer you coverage during a health condition or an overall decline in your health.

Cost to convert term to whole life insurance

Usually you can convert your term policy for free, but some providers may charge a fee for the addition of a conversion rider. Upon conversion, premiums will probably increase based on your age. However, your provider may offer a partial conversion or a term conversion credit to help with offsetting costs.

Alternatives to convertible term life insurance

If your policy isn’t convertible or if the cost of converting to whole life insurance is too high, there may be some alternative ways to get the right coverage for your needs.

Partial conversion

As long as it’s permitted by your insurer, you can extend coverage without paying premiums for the full benefit for a partial conversion. This would result in a smaller death benefit and lower premiums. The part of your plan that isn’t converted would still provide coverage as a term policy. This might help offer you extra protection at a lower cost than a full conversion, though you will have two premiums.

Renewable term life insurance

You can opt to renew your existing policy if you are looking for coverage to last a few more years. Usually, term policies will offer an option to renew your coverage annually once the initial term ends. Your premiums will change to reflect your current age and will continue to go up every year.

Purchase a new term life policy

You have the option to select a new term life policy that meets your current needs. However, upon doing so, this new policy will reflect your present health and age, which may affect the overall cost of your premiums.

Now that you're familiar with convertible term life insurance, you might wonder if it's right for you and your family. Its flexible coverage and conversion benefits can offer the kind of protection you need as your needs change over time, but ultimately, there are many complex factors that can determine whether or not this type of life insurance is right for you.

With so much to take into consideration, shopping for life insurance can be an overwhelming process. That’s why Nationwide has a team of specialists who are here to help you with the process of buying insurance online, as well as deciding whether or not you should change your current policy.