Conversion Privilege
What Is a Conversion Privilege?
A conversion privilege is a feature in some term life insurance policies that allows the policyholder to convert the policy into a permanent life insurance policy without undergoing a new medical examination.
This option provides flexibility for individuals whose insurance needs change over time.
Why It Matters
Conversion privileges allow policyholders to maintain life insurance coverage even if their health changes. Without this option, someone who develops health issues may struggle to qualify for new life insurance coverage.
This feature helps protect long-term insurability.
How Conversion Privilege Works
A policyholder may exercise the conversion privilege within a specified time period or before reaching a certain age.
The conversion process typically involves:
- selecting a permanent life insurance policy
- converting part or all of the term coverage
- paying a higher premium for permanent coverage
No additional medical underwriting is required.
Example
Someone who purchased term life insurance in their 30s may later convert the policy to whole life insurance in their 40s without a new health exam.
Conversion Privilege vs Policy Renewal
- Conversion privilege allows the policy to change from term to permanent insurance.
- Policy renewal allows a term life policy to continue for another period.
FAQs About Conversion Privileges
Do all term life policies include conversion privileges?
No. This feature depends on the policy’s terms.
Does converting a policy increase premiums?
Yes. Permanent life insurance typically costs more than term life insurance.
Is a medical exam required for conversion?
No. Conversion usually does not require new medical underwriting.
Related Terms
- Term Life Insurance
- Whole Life Insurance
- Universal Life Insurance
- Insurance Policy
- Evidence of Insurability
