Conversion Privilege
The conversion privilege is a policy provision allowing the policyholder to convert a term life insurance policy to a permanent life insurance policy without providing evidence of insurability (no medical exam required).
š¬ Video Explanation
Exam Tip
Conversion = term to permanent WITHOUT medical exam. Valuable if health declines. Check conversion deadline!
What is Conversion Privilege?
The conversion privilege is a valuable option in term life insurance that allows policyholders to convert their term policy to a permanent (whole life or universal life) policy without proving insurability. This is crucial for those whose health has declined since purchasing the original policy.
Key Features
| Feature | Description |
|---|---|
| No Medical Exam | Health status doesn't matter |
| Guaranteed Option | Cannot be denied by insurer |
| Same Face Amount | Usually can convert up to original amount |
| Premium Change | New premium based on attained age |
Types of Conversion
| Type | Description |
|---|---|
| Attained Age | Premium based on current age at conversion |
| Original Age | Premium based on age when term started (may require back premiums) |
Conversion Time Limits
| Restriction | Typical Requirement |
|---|---|
| Conversion Period | Often limited to first 10-15 years |
| Age Limit | May not convert after age 65-70 |
| Policy Status | Must be in force (not lapsed) |
| Before Term Expires | Must convert before term ends |
When to Consider Converting
| Scenario | Consideration |
|---|---|
| Health Declined | New policy would be expensive/denied |
| Need Permanent Coverage | Estate planning, final expenses |
| Cash Value Desired | Want savings component |
| Policy Expiring | Term ending soon |
Conversion Process
| Step | Action |
|---|---|
| 1 | Request conversion form from insurer |
| 2 | Select permanent policy type |
| 3 | Choose coverage amount (up to current) |
| 4 | Submit form with first premium |
| 5 | Policy converts automatically |
Conversion Privilege vs. New Application
| Feature | Conversion | New Application |
|---|---|---|
| Medical Exam | Not required | Usually required |
| Health Impact | No effect on approval | Affects approval and rate |
| Guaranteed | Yes, by contract | Not guaranteed |
| Premium | Based on current age | Based on health class |
Premium Considerations
| Factor | Impact |
|---|---|
| Age at Conversion | Higher age = higher premium |
| Policy Type | Whole life vs. universal affects cost |
| Original Health Class | May retain original rating |
Study This Term In
Related Terms
Term Life Insurance
Term life insurance provides death benefit protection for a specific period (term), with no cash value accumulation, offering the lowest premium for the highest coverage.
Whole Life Insurance
Whole life insurance is a permanent life insurance policy that provides lifetime coverage with fixed premiums, a guaranteed death benefit, and cash value that grows at a guaranteed rate.
Universal Life Insurance
Universal life insurance is a permanent life insurance policy with flexible premiums and death benefits, plus a cash value component that earns interest based on current market rates.
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