Can you convert term life insurance to whole life insurance?

Life insurance provides peace of mind that your loved ones will be taken care of financially when you die. The two main types of life insurance are term and whole life.

Term life insurance policies remain in effect for a predetermined period — generally, from one to 30 years. You make payments each month during that term, and if you die before the policy expires, your beneficiaries receive a lump-sum, tax-free payout known as a death benefit.

Once the policy expires, you can typically extend your current term, get a new policy, or convert your policy to a whole life policy. If you die after the policy expires, your beneficiaries won't receive a death benefit.

Whole life insurance, by comparison, is a type of permanent policy, which means coverage lasts your whole life. It tends to be more expensive than term life insurance as a result. You make payments on this type of policy under you die.

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Can you convert term life insurance to whole life insurance?

The short answer is yes. 

You can convert most term life insurance policies to permanent life insurance policies, including whole life insurance. You can determine if your policy — or a policy you're considering — allows conversion by looking for a conversion provision in the policy documents. You may need to purchase a term conversion rider to have this option.

Reasons to convert term life insurance to whole life insurance

When you buy a term life insurance policy, you estimate how long you'll need coverage. For instance, you might consider how long your kids will depend on you for financial support. You choose a term you believe will provide the coverage you need for as long as you need it.

But life has a way of straying from our plans. You might realize when your term expires that you want to continue coverage. You could get a brand-new term life policy, but it's much easier to convert your term policy to a whole life one. Plus, whole life policies allow you to build savings, while term policies do not.

Here are five reasons you might want to convert your coverage after your term life insurance policy expires.

1. Your health has changed

When you apply for a new life insurance policy, you may need to undergo a medical exam to determine how risky you will be to insure. If you're deemed too risky, the provider might require a higher premium or deny you coverage altogether.

Converting your policy doesn't require a new medical exam. If your health has worsened since you took on your term policy, this can save you money on premium payments or ensure you get coverage at all.

2. You still have dependents

You might want to continue providing financial assistance to dependents for many reasons. Maybe your child is still in college or you've started providing for a sick loved one. In cases like this, converting your term life insurance policy to a whole life policy can guarantee you'll be able to care for these dependents for as long as you need to.

3. You want to leave a legacy

Life insurance can help you provide for your children and grandchildren. They can use their death benefit for whatever they want, from education to living expenses. For this reason, life insurance is often an option considered when estate planning.

4. You want to cover funeral expenses

When you die, your loved ones will already be dealing with a lot, from their grief to planning your funeral. A whole life insurance policy can alleviate some of their stress by providing the funds to pay for your end-of-life expenses, such as cremation or burial. 

5. You want to build your savings

Term policies don't build cash value. You make your monthly payments, and when the term expires, that's it. Unless you have a return-of-premium policy (which can be pricey), you won't get any of that money back.

With whole life insurance, you build guaranteed cash value that grows tax-free. You can pull from this cash value to pay for things like outstanding debt, unexpected medical expenses or retirement while alive. You may incur fees for doing so, but it can still be a better strategy than other financing options, such as taking on high-interest credit card debt.

Compare your life insurance options by starting with a free estimate or using the table below.

How to convert term life insurance to whole life insurance

To convert your term life insurance policy to a whole one, review your policy documents to make sure it includes a conversion provision. Next, find out if there's a conversion period. Some life insurance providers allow you to convert a term policy to a whole one at any point during the term. Others only allow conversions within a certain number of years (e.g. the first 10 years of the term).

Once you know this information, contact your insurance provider to ask for a conversion. You can convert a portion of your policy's value or the whole amount. The more you convert, the higher your premium will be for the whole life policy.

There are no fees to convert your term policy to a whole life policy, but your premium might increase since older policyholders are riskier to insure. If you have a term life insurance policy and still need coverage after the term ends, converting it to a whole life insurance policy is worth considering.

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