4 Reasons to Convert Your Term Life Policy to a Whole Life Policy

Term life insurance and whole life insurance have one sure thing in common: They both pay a death benefit when the covered person passes away. However, term life insurance and whole life insurance differ in terms of coverage length and cash value accumulation.

While term life insurance helps cover short-term needs with temporary coverage for a set number of years and offers no cash value accumulation, whole life insurance offers lifetime protection that builds cash value at a guaranteed interest rate.

Why many people start with term life insurance

People who purchase life insurance during their younger years more often than not opt for term life insurance rather than whole life insurance. Younger people are drawn to term life insurance for a few important reasons:

  • It’s great coverage and peace of mind – Term life insurance pays cash benefits to a named beneficiary if the insured passes away. It’s great for young families who have financial obligations and may need income replacement if the insured passes away.
  • It’s usually affordable – Term life insurance rates tend to be less expensive than whole life insurance rates. This makes term life insurance a great, low-cost way to build a temporary safety net for young families.
  • Optimism about the future – When a 35-year-old purchases a 25-year term life insurance policy, they know that they will be 60 years old when their policy expires. Many people hope and plan to be mortgage-free, debt-free and well-prepared for retirement by this age.

Your changing needs

However, as time passes, your financial picture may change. You may find as you get older that you still have a need for life insurance. Here are a few reasons why many people may still need life insurance as they near and enter retirement:

  • Debts – Although it’s ideal to enter retirement debt-free, many retirees are still paying off debt. According to the Federal Reserve’s Survey of Consumer Finances, 35% of households headed by people ages 65 to 74 have a mortgage. And in the 75 and older age bracket, 23% still have a mortgage.1 What’s more, four in 10 retirees say paying off debt is a current financial priority.2 Life insurance can help protect your loved ones from your debts in the event you pass away.
  • Insufficient nest egg – Many retirees are unprepared for the high medical and care expenses they may face in retirement. According to Time magazine, the average American couple retiring today at age 65 will need $280,000 to cover health care and medical costs in retirement.3 At the same time, long-term care comes at a steep price, with a private room in a nursing home costing $253 a day, or $7,798 a month.4 Life insurance benefits can help protect your surviving partner or loved ones from medical and care expenses.
  • Final expenses – A typical funeral runs about $10,000 for a traditional service and burial. However, the price goes up when obituary notices, private transportation, flowers and other typical final expenses are included.5 Life insurance benefits can help ensure that your loved ones aren’t financially burdened during their time of grief when you pass away.
  • Leaving a legacy – As you age, you may develop a desire to leave a legacy for your children, grandchildren and/or a cause that you hold dear. A whole life insurance policy can help make that possible.
  • Cash value – In retirement, you may be attracted to the cash value that you can build through a whole life insurance policy. You can access the cash value through loans and withdraws and use it for any needs you may have—adding to your retirement income, paying off debts or covering emergency expenses.

What is convertible term life insurance?

Do you have a term life insurance policy, but want and need the lifelong benefits of whole life insurance? Rather than buying a completely new policy, you may have the option to choose a term life insurance conversion. Many term life insurance policies include a stipulation that enables you to convert some or all of your coverage into a whole life insurance policy within a specified time frame.  Please note these provisions typically only apply when converting to a policy from the same company that issued the original term policy.

What are the advantages of converting to whole life insurance?

There are many advantages of converting term life insurance to whole life. Here are four reasons to consider a term life insurance conversion:

  1. No medical exam

    Oftentimes, you can convert term to whole life without undergoing another health examination. This means that your premiums will not be affected by any health conditions you may have developed over the years. However, your premiums will most likely be affected by your age.

  2. Cash value accumulation

    Another advantage of converting term to whole life is that you will begin building cash value at a guaranteed interest rate. Down the road, you can use your accumulated cash value for many purposes, such as adding to your retirement income, paying off debts or covering emergency expenses.

  3. Term life insurance conversion credit

    What is term life insurance conversion credit? Some insurance companies offer a term life insurance conversion credit to help offset the costs of increased premiums on a whole life policy. For example, a conversion credit may lower your premiums for the first year your converted policy is in force. Ask your insurance company if they offer a term life insurance conversion credit.

  4. Gradual conversion

    Some insurance companies will allow you to convert your policy from term to whole in stages. This feature enables you to enjoy the benefits of both policies while converting your policy in chunks as your financial situation allows. Ask your insurance company for details.

Ready to learn more about ways to convert term life insurance to whole life insurance?

Reach out to your agent to learn about our life insurance conversion options here at Bankers Life. Your agent can help make the process simple and hassle-free, so you can continue enjoying peace of mind!

1MarketWatch, Will a mortgage be a dark cloud over your retirement?,, November 12, 2018.
2CNBC, How you manage debt will impact those retirement dreams,, 2019.
3Time, Here’s How Much the Average Couple Will Spend on Health Care Costs in Retirement,, April 19, 2018.
4Department of Health and Human Services, Costs of Care,, October 10, 2017.
5Parting, How Much Does the Average Funeral Cost?,, January 23, 2018.

Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.

Policies are underwritten by Bankers Life and Casualty Company (Chicago, IL), Colonial Penn Life Insurance Company (Philadelphia, PA) and in New York, Bankers Conseco Life Insurance Company (Jericho, NY).