A Term Conversion Rider allows the policyholder of a term life insurance policy to convert their policy into a permanent policy (also known as a lifetime policy) by a specified deadline. By definition, term life insurance policies are only designed to last for a designated period of time. However, as the policy nears its guaranteed fixed price termination date, many policyholders may decide they wish to continue their life insurance coverage by converting to a permanent policy.
A Term Conversion Rider can be added to a term life insurance policy at the time of purchase, often for no additional cost. This rider guarantees that you have the option to convert all or some of your policy benefits into a permanent policy by a designated date, with no additional medical underwriting. This feature allows a policyholder to continue to receive coverage based on their original health rating from the time they first purchased their term policy, regardless of any health conditions that may have arisen since the policy’s effective date. This guarantee is extremely important for anyone who has developed a serious health condition such cancer, heart disease, or diabetes, because it locks in coverage for a lifetime. If you wanted to purchase a policy after being diagnosed with one of these conditions, your options for life insurance would be slim to none.
While a basic conversion rider does let you keep your future coverage options open, there are specific timeframes by which you must request a conversion. While the exact requirements may vary by insurance company, the following are examples of conversion periods for basic term conversion riders:
- For a 10-year term policy, the policyholder must convert with the first 7 years
- For a 15-year term policy, the policyholder must convert within the first 12 years
- For a 20-year term policy, the policyholder must convert within the first 15 years
- For a 30-year term policy, the policyholder must convert within the first 20 years
