Convertible term assurance

Convertible term assurance works by giving you the flexibility to convert your term life policy to a whole of life policy at the end of its term.

It’s also sometimes described as the ‘conversion option’ because it’s an added benefit to a standard term life insurance policy.

You can’t choose to have the conversion option at a later date, it must be something that’s included when your cover starts.

As you may know, standard term life insurance expires after a certain period of time (for example, after 20 years).

If there’s no death during this time, then the cover will simply expire and you’d need to obtain new cover.

However, if you have the conversion option included in your policy, then you could convert the term-based policy to a whole of life policy just before it expires.

Whole of life insurance provides cover until you pass away and a pay out is guaranteed to your loved ones.

As mentioned, convertible term assurance is essentially term life insurance with an added benefit.

Having added benefits will increase the cost of your monthly life insurance premium.

If you choose to convert at the end of the policy term, then the cost of your new cover will depend on the insurer and what they take into account at the time of conversion.

Typically, your age and the details of the new policy will determine the cost.

However, some insurers also consider your smoking status and/or your health, which could really bump up your premiums.

As mentioned, Reassured cannot arrange convertible term cover, but we can arrange standard term cover from as little as 20p-a-day, get in touch to see if we can help you save money on your premiums.

These are the pros and cons of having the conversion option as part of your policy:

You may think, why not just take out whole of life insurance in the first place?

Well, whole of life insurance is generally more expensive than term life insurance with the conversion option.

This is because whole of life is exactly what it says, cover for the whole of your life and guarantees to pay out to your loved ones when you pass away.

Taking out a whole life policy initially whilst your still fairly young means paying a higher premium for a longer amount of time (and up until you pass away).

If you’re young and healthy, then term life insurance with the conversion option can provide affordable protection whilst your family may need it the most, with the flexibility to convert to whole of life later on, which guarantees to pay out (perhaps providing loved ones with an inheritance).

For example, if you’ve become seriously ill and your term life cover is about to expire, then having the option to switch to a whole of life policy would be extremely valuable.

You may not need to disclose that you have a new illness and you’ll have peace of mind that your loved ones are protected no matter what.

The final review for convertible term assurance is that it could be a worthwhile benefit, depending on your circumstances and your budget.

It does mean you could be paying life insurance premiums for a significant proportion of your life, which is something to consider.

Some people may wait until later in life to take out whole of life insurance, but then they risk paying higher premiums if they develop any illnesses at all during their lifetime.

Also, one other thing to consider is that convertible term assurance is only available through a limited number of insurers, which means you won’t have the advantage of comparing multiple quotes to find the most suitable cover.