31 May 2012 0 Comments

Conversion May Be The Only Answer

When is Permanent Insurance better than Term?  The answer is “many times”, but certainly when that is your only option.  If your term insurance is coming to its end—either an individually owned policy that has run its course, or a group policy you lose when you are no longer employed—you may have no other choice if you are uninsurable or can qualify only for a policy with a highly rated-up premium.  Converting to a Permanent policy may be your only option.

You may want to look around to see if there is a better option.  And that’s a good idea because many times, even if you have a health history you may be able to qualify for policies that provide you with more options than one available through conversion. Don’t, however, let your conversion rights slip away.  Typically you’ll have only 30 days following termination of employment to convert group insurance and you should be aware of when conversion rights terminate on an individual policy.  Remember, conversion means you cannot be turned down regardless of your health, but you must exercise that right before the conversion feature terminates.

Getting information from an employer about converting group term may not be easy.  No one makes a commission if you convert and the employer’s claim experience suffers with conversions, so you must be motivated to get the answers yourself.  When individually owned term is converted, however, there is a commission paid to the agent who handles the conversion, so getting assistance should be easier.

If your conversion rights are about to expire and you are still waiting for an answer about being able to qualify for another policy, exercise the conversion, pay the premium monthly and then drop it if you do get a better policy elsewhere.

Another scenario where conversion might be your best – and only – option is if you own a Term Life policy on the life of an ex-spouse or partner who is uninsurable or refuses to apply for a new policy. If you wish to continue coverage, you can convert the existing policy before the term expires without his or her knowledge.

Next I’ll be covering the use of Permanent Insurance for charitable bequests and for what I refer to as “The Legacy Factor.”

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