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Convertible term insurance is a type of insurance coverage that may be converted to a whole or permanent insurance policy, assuming that applicable conditions are met. While not offered with every type of term insurance policy, convertible term insurance has become more common than in past years. Convertible insurance can related to many different types of coverage, but tends to focus on the issuing of life insurance coverage.
One of the advantages to a convertible term insurance situation is that the insurer is bound by the terms and conditions of the term insurance policy to renew the coverage, even if the insured party undergoes a change in the status of his or her health. In many instances, this means that as long as the payments are made on time and otherwise complies with the conditions of the policy, the coverage will remain in full effect.
Along with ensuring that the term coverage will continue, a convertible term insurance policy also affords the potential to upgrade the policy from a term format to a whole format. This is generally the case with term life insurance policies that are convertible. Assuming the insured party meets the guidelines set in the policy, it may be possible to convert the term coverage into whole life coverage at certain points during the life of the coverage. This type of conversion privilege allows persons to begin with a relatively inexpensive term life policy, but later convert the coverage into whole life without the need to go through additional screen processes.
In general, convertible term insurance is understood to be an example of guaranteed renewable insurance coverage. That is, as long as the payments are made on time, the policy will not be terminated and the option to convert the policy will remain possible. However, it should be noted that converting a term policy to whole coverage is usually not mandatory. If the insured party prefers, the coverage can remain as a term policy for as long as the insured remains alive.
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