Converting Term to Whole Life

Updated August 2, 2019 . AmFam Team

If you’re considering converting your term life to whole life insurance, we’re here to help you better understand the benefits of making the switch.

Your reasons for having life insurance may change over time, and if you’re considering converting your term life policy to whole life insurance, we’re here to help you better understand the benefits of making the switch. It’s about ensuring you have the right coverage to protect your loved ones’ needs.

What’s the difference between term life and whole life insurance?

Before diving into the benefits of converting your term life policy into a whole life policy, it’s important to recognize the differences between the two. Let’s take a look.

Term life insurance. Also known as temporary life insurance, term life offers coverage for a specific time period, commonly in terms of 10, 20 or 30 years. You’ll choose the term length when you buy the policy, and your beneficiaries will receive what’s known as the death benefit if you pass away within the term.

Usually, the coverage amount and the premium remain the same throughout the term. This is a more affordable option than whole life insurance, and is designed to protect your loved ones when they are dependent on you or to cover temporary obligations.

American Family Life Insurance Company offers DreamSecure Simplified Term Life Insurance and DreamSecure Term Life Insurance

Whole life insurance. Whole life provides coverage for your entire life and has the ability to build up cash value within the policy.

Though it’s more expensive than term life insurance, you’re guaranteed coverage as long as the policy stays in force, whereas term life insurance only provides coverage if you were to die within the coverage term. Your premiums will always remain the same, regardless of changes in health or age. Learn more about the benefits of whole life insurance.

Get a better idea of our coverages by comparing options with our life insurance comparison chart.

When to Convert Term to Whole Life Insurance

Many people choose to convert their term life insurance policy (or a portion of their term policy) to permanent life insurance to ensure that they have coverage to pay for final expenses no matter how far down the road it may be needed or to guarantee some sort of financial legacy is left to their heirs. Here are a few other key items to consider when choosing to convert term life to whole life insurance.

Cash value. A popular reason many people convert term life insurance to whole life insurance is to take advantage of the cash value feature. Whole life not only guarantees the life insurance benefit, but you have the ability to borrow against the cash value that accrues over time, if needed.

In comparison, term life insurance is like renting a home, where you make monthly payments but don’t get anything in return once the lease ends. On the other hand, whole life insurance is like buying a home. But instead of gaining equity, the cash value of a whole life policy grows over time and you’ll have guaranteed coverage for your whole life.

Health matters. If your health has declined over the years, you might not be eligible for life insurance when your term life policy expires or it could be much more costly. Usually, if you convert your term life to a whole life policy, you can do so without having to take a medical exam. You’ll learn more below about how a convertible insurance policy works.

Lifelong dependents. If you’re taking care of lifelong dependents, like a child with special needs, you might want to convert to a permanent policy that covers your whole life, so you can help financially protect their future in the event you pass away.

What Is a Convertible Insurance Policy?

A convertible insurance policy, like American Family’s DreamSecure Term Life coverage, allows you to convert a portion or all of your existing term life policy to a cash value policy at some point during the conversion eligibility period. The perk? You can do this without having to take a medical exam or go through other screening that could affect your eligibility if you’ve developed certain health conditions. This delivers the benefit of having a less expensive term life insurance policy to begin with, while still being able to convert to a long-term policy later when your insurance needs and financial means change.

You’ll want to make sure to convert before the conversion deadline in the term life insurance policy. Some companies only allow conversion within a specified conversion window, such as the first 10 years, while others allow it at any point during the term. It’s more affordable to do so when you’re younger because premiums for life insurance policies become more expensive as you age. If you are over the age of 50, you may want to consider a senior whole life policy

So, take a look at your current budget and the financial obligations of your family to help you decide the best coverage to financially protect your loved ones. Your American Family Insurance agent is available to help answer questions about converting American Family Life Insurance Company life insurance coverages, and they’ll work with you to decide your best possible option.

This is a brief description of coverage and is subject to policy and/or rider terms and conditions which may vary by state. Fixed and guaranteed premiums are statements about the policy as determined at issue, and any changes made to a policy may affect the premium and are subject to our underwriting rules. The words lifetime, lifelong and permanent are subject to policy terms and conditions. DreamSecure Whole Life Insurance policies mature at age 121. Please check with an American Family agent for details on coverages and restrictions.

* Any loans taken from your life insurance policy will accrue interest. An outstanding loan balance (loan plus interest) will be deducted from the death benefit at the time of claim or the cash value at the time of surrender. If the loan balance grows too large for the cash value to support it, the policy could terminate.

Policy Forms: ICC18-33 (10), ICC18-33 (15), ICC18-34 (20), ICC18-35 (30), L-33 (10)(ND), L-33 (15)(ND), L-34 (20)(ND), L-35 (30)(ND), L-33 (10)(SD), L-33 (15)(SD), L-34 (20)(SD), L-35 (30)(SD), ICC18-36 (10), ICC18-36 (15), ICC18-36 (20), ICC18-36 (30), L-36 (10)(ND), L-36 (15)(ND), L-36 (20)(ND), L-36 (30)(ND), L-36 (10)(SD), L-36 (15)(SD), L-36 (20)(SD), L-36 (30)(SD), ICC17-225 WL, L-225 (ND) WL, L-225 WL, ICC17-227 WL, L-227 (ND) WL, L-227 WL

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