When considering life insurance for yourself, you’ll hear a lot about the two types available: term and whole life. What’s the difference between them? Which one is better for you? And, what happens if you choose term life insurance and then change your mind? Let’s see what it means to have different types of life insurance, how to convert term to life, and if that’s even an option for you.

What Is Term Life Insurance?

Term life insurance provides coverage for a specified period, typically 10, 20, or 30 years. It offers a death benefit to beneficiaries if the insured person passes away during the specified term. Premiums for term life insurance are generally lower than for whole life insurance, which is why many people choose it.

What Is Whole Life Insurance?

Whole life insurance is permanent coverage that provides life insurance protection throughout your life as long as premiums are paid. It usually offers a cash value component that grows over time, which allows you to build savings within the policy. Whole life insurance includes guaranteed death benefits, fixed premiums, and the potential to borrow against the cash value. Because of those benefits, whole life insurance protects you for your lifetime and tends to have higher premiums than term life insurance.

Key Differences Between Term Life and Whole Life Insurance

Term life insurance and whole life insurance are two distinct types of policies, each with its own features and benefits. Some key differences include:

Cost

Term Life Insurance: Generally more affordable due to its specific period of coverage and it does not offer a cash value component.

Whole Life Insurance: Tends to have a higher fixed premium which is a component of the cash value that supports the cost of the insurance and death benefit over the life of the insured. The cash value can grow over time, serving as a savings element within the policy.

Policy Benefits

Term Life Insurance: Offers financial protection for beneficiaries by providing them a death benefit if the insured passes away during the policy term.

Whole Life Insurance: Offers permanent coverage, guaranteed death benefits, fixed premiums, and the potential to accumulate a cash value that can be accessed during the policyholder's lifetime. ​​

Complexity

Term Life Insurance: Typically more straightforward, with fixed or variable premiums and provides coverage for a specific period. Some term plans allow you to reduce the death benefit if the premium becomes cost-prohibitive.

Whole Life Insurance: Can be more complex due to its permanent nature, cash value component, and other potential policy benefits.

Reasons to Convert Term Life to Whole Life Insurance

Some people choose to convert their term life insurance to whole life insurance for the following reasons:

Financial Security and Stability

Converting term life insurance to whole life insurance often provides long-term financial security and stability by ensuring coverage throughout your lifetime. The benefits include peace of mind and protection against unforeseen financial hardships.

Building Cash Value

One key benefit of whole life insurance is the cash value component. This serves as a financial asset, allowing policyholders to accumulate savings that can be accessed during their lifetime.

Flexible Premium Payments

Whole life insurance often offers flexible premium payment options, allowing policyholders to adjust their payments based on their financial circumstances. This flexibility can help you manage insurance costs.

Permanent Coverage

Whole life insurance provides permanent coverage as long as premiums are paid, giving policyholders and their loved ones lifelong protection, which is especially important for those who seek long-term financial planning and security.

Eligibility for Converting Term Life to Whole Life Insurance

Policyholders typically need to meet specific eligibility criteria for converting their term life insurance to whole life insurance. These criteria may include:

• Conversion Option: The term life insurance policy must have a conversion option built into the contract.
• Conversion Period: There is usually a specific period during which the conversion can take place, often within a specified number of years after the policy is issued
• Age Limit: Policyholders may need to convert before reaching a certain age, typically before the age of 65 or 70, depending on the insurer.

Considerations Before Converting Term Life Insurance

Before you start the process of converting your term life insurance to whole life, consider the following items and consult with your insurance provider directly to get answers to any questions.

Potential Costs and Fees

Converting term life insurance to whole life insurance may involve additional costs and fees. These can include higher premiums for your new whole life coverage, potential conversion charges imposed by the insurance provider, and any other fees associated with adjusting the policy.

Assessing Your Financial Goals

Whole life insurance offers permanent coverage with a cash value component. Depending on your needs, this may align with your long-term financial planning goals, such as estate planning.

Understanding Policy Terms and Conditions

Before taking any action, make sure you thoroughly understand the terms and conditions of your term life and whole life insurance policies. This includes premium payments, coverage limits, cash value accumulation, potential policy loans, and any restrictions or exclusions that may apply.

Consulting with a Financial Advisor

We recommend talking with a financial advisor so that converting term life to whole life aligns with your specific financial needs and goals. A financial advisor who specializes in military lifestyles can provide personalized guidance based on your unique factors, such as income, expenses, assets, liabilities, and overall financial objectives.

Steps to Convert Term Life to Whole Life Insurance

To convert term life to whole life insurance, you’ll need to follow certain steps, although specific requirements and procedures may vary based on your insurance company and policy terms.

Review Your Conversion Options

Before you start the process, confirm whether your term life insurance policy includes a conversion option.

Contact Your Insurance Provider

Once you confirm your eligibility for conversion, contact your insurance provider or agent to discuss the conversion process, understand any requirements, and request the forms you need.

Complete the Conversion Forms

You’ll need to complete the conversion forms provided by your insurance company, and provide the information required.

Undergo a Health Evaluation (If Required)

Depending on your new insurance provider and policy terms, you may need to undergo a health evaluation, which may include a medical questionnaire or a full medical exam.

Review and Confirm Your New Policy Terms

After submitting the necessary forms and completing any required health evaluations, you should review the terms of your new whole life policy. Once you’re satisfied, you can confirm the conversion and start your premium payments as per the new policy.

FAQs About Term to Whole Life Insurance Conversion

Here are a few FAQs about converting term life to whole life insurance. Remember to consult your insurance provider directly before making any decisions or starting a conversion.

Is It Worth Converting Term Life to Whole Life Insurance?

Converting term life to whole life insurance may be worth it if you’re seeking permanent coverage, estate planning benefits, and/or a cash value component. It's especially beneficial when long-term financial protection for your dependents is a priority. Whole life insurance can be a valuable financial asset due to its cash accumulation feature and potential for policy loans or withdrawals.

How Long Does the Conversion Process Take?

The conversion process from term life to whole life insurance typically takes a few weeks to complete. It involves submitting an application, undergoing underwriting (if necessary), and finalizing the policy terms with your insurance provider. The exact timeline will vary based on factors such as your provider’s processing speed and the completeness of your application.

Can I Partially Convert My Term Life Insurance?

It’s generally not possible to partially convert term life insurance to whole life insurance. Term policies are designed to provide coverage for a specific period without a cash value component. However, policyholders can explore options such as adding riders, doing a partial reduction of the term death benefit or purchasing additional whole life coverage alongside their existing term policy to enhance their insurance protection.

Get the Right Coverage with AAFMAA

AAFMAA offers insurance policies specifically designed to meet the needs of military families. We’re proud to serve our nation’s servicemembers, their families, and Veterans from all branches. Check out our comprehensive military life insurance tools to find your best option.

Contact us today to discuss the benefits of AAFMAA Membership, including a broad range of life insurance options.