As we go through the major life stages, it is common that we accumulate debts. Such obligations arise from needs that come with starting a family, purchasing a house and vehicle, opening a business, or investing in retirement. Many of us tend to avail of the help of financial institutions in order for us to meet the required amounts. Term life insurance is the most affordable that one can avail with plenty of the necessary coverage included in the policy. And this type of insurance also covers debts. In terms of related riders, the most important is the term conversion privilege.
Term insurance may not be considered permanent. But, it is very important to understand that it is the most inexpensive insurance that one can purchase to replace one’s income, pay for education, and cover mounds of debt.
Having a term life insurance does not stop one from getting permanent life insurance. It is expected that as one becomes more adult, we realize that having a Whole Life or Universal Life insurance makes more sense. But it would not be wise to cancel the term life insurance one already has. Canceling it would cause a termination of the coverage which would truly be a huge mistake.
Rates of Term Insurance
The following are the factors that will determine the periodic premium for term insurance:
- Driving record
- Insured’s health history and insured family’s health history
- Record of prescription drugs
- Travel to hazardous or dangerous countries
- Record of dangerous hobbies such as scuba diving and mountain climbing
Term insurance is inexpensive, especially for younger adults wherein the rates can guarantee coverage of up to thirty years. Insurers offer annually renewable policies based on age when a policy expires. If you stay in good health upon policy expiration, 10 or 20-year term policies may be available for you to buy which is a more inexpensive option.
For adults who are more focused on their work than on their health, it is likely that they acquire some health issues along the way. In that case, it would be better to switch to permanent insurance from term life insurance. Moreover, if the kids have already entered college and debts are significantly reduced, the needed amount of life insurance will also be reduced. This is where the importance of the conversion rider comes clear to the policyholder.
The Conversion Rider
The term insurance policy feature that is most valuable is probably the conversion rider. All or a portion of the policy can be converted to permanent insurance. An insured can convert a portion of the term coverage’s face amount at one point and convert the remaining balance at a later time when it is more appropriate to do so. But it is worth noting, though, that insurers set conversion time limits.
What’s good with having this rider is that it allows conversion without the need to provide proof of good health. This reduces the possible dismay new policy owners feel for attained aged ratings.
It is important to understand that one can avail of a term conversion only if the policy owner’s insurer offers permanent insurance products as well. This may be whole life or universal life insurance. Some insurers have specifically designed permanent products for term conversions. The broker will rate the policy as soon as the time for exercising the conversion privilege comes. The rating will be based on the insured’s current age and the policy he or she will choose to convert to.
To avail of the conversion privilege, you have two options. One is to seek assistance from your insurance policy agent. The other option is to let other agents handle the conversion as long as they are connected to the same insurer.
BBI Financial, Inc. can take care of the procedures of the conversion for you. The following are the steps necessary to take place:
Give permission to your insurer to send your current policy information. A form is available for you to sign granting the needed permission.
Upon receipt and review of the information of your current policy, the insurance products that are available to use in the conversion process will be determined.
We will present to you the products that are suitable not only for your situation but for your budget as well. As soon as we agree on the best product for you, the new policy’s cost and benefits will be described. We will also provide you with a printed illustration.
You will fill out an application form for the new policy. This time it will be easier to complete because you no longer have to answer health history questions.
Application approval will be faster since your application will no longer have to go through medical underwriting. Usually, the policy will be issued within seven to ten days from the day your signed application is received by the insurer.
Getting a conversion rider with your term insurance is definitely a smart decision. But you also have to make sure that the insurance company you are buying from also offers permanent life insurance products. You have to be cautious of companies that do not guarantee the availability of a product when you want it. Even if the extra premium for the rider is charged by the company.
Just to be sure, it is always best for the term insurance to be purchased from a company that is offering and has depended on various permanent products as a part of their portfolio over the years.
People buy life insurance to protect us and our families from unforeseen events in our lives. It is, therefore, reasonable to buy life insurance while you are young and healthy which gives you access to rates that gives you value for money. You may even buy as much as you can easily afford.
If you buy a policy with a term conversion privilege, later in life, you can convert to permanent insurance. You will never have to worry about your health status to get the best available rates.