9 July 2012 0 Comments

When Should Term Be Replaced With Permanent?

There are three situations when you should consider replacing a term policy with a Permanent Policy:

  1. When you know your need will extend beyond the point when term is available—the need is now Permanent in nature.  And you have the premium required to maintain the full amount of death benefit you need today.
  2. You are advancing in age and you’re not sure for how much longer you may need protection, but it will likely extend beyond the duration for which you purchased your term policy.  You will want to look at UL policies that have guaranteed death benefits.  You can get a guarantee that will take you to age 121(that should do it), or you can choose just about any duration of guarantee to meet your needs, thereby reducing your current premium.  These UL policies can give you incredible flexibility.
  3. When you have no other reasonable choice.  Your term policy is coming to the end of its original duration, you have had a serious illness and are no longer insurable and the term premiums in your existing policy skyrocket.  If you are to keep protection, converting the term to a permanent policy may be your only choice.

It is very important to keep track of your conversion rights.  They may not extend to the end of your original term duration.  Letting your conversion date slip by could mean the difference between your ability to maintain coverage, or being forced to lose your policy.  With that said, if you are moving from Term to Permanent, if you are insurable, don’t automatically opt for the conversion policy.  A better plan for your needs might be available from your current company or a new one, if you can qualify.  But, get started looking at least three month before your conversion rights lapse so you have enough time for the underwriting process.

In my next two blogs I’ll be looking at replacing one Permanent policy with another Permanent policy. 

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