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).
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
InsuranceTerm 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
InsuranceWhole life insurance provides permanent death benefit protection with guaranteed cash value accumulation, level premiums, and coverage that lasts your entire life.
Universal Life Insurance
InsuranceUniversal 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.