When choosing an insurance policy, most Canadians consider the premium cost, length of the contract, and policy benefits. Over time, policyholder goals and expectations can change. When this happens, we encourage policyholders to think about converting their term insurance to whole life insurance to better meet their needs.
Deciding whether you should convert term insurance to whole life insurance is an important decision and one you should contemplate carefully. Today we´ll clarify the difference between both insurance types, what you should consider when converting, reasons to convert, and how to do so.
Term life insurance provides coverage over a limited number of years defined in the contract, while whole life insurance covers the policyholder until death. It´s important to note that you can convert a term policy into a whole life policy, but not vice versa.
Both policies have other differences, broken down below.
Term insurance is time-limited, which makes its premiums more affordable than whole life insurance. Premiums may increase with age or over time if contracts are renewed.
This policy type is a great choice for those who seek protection during vital financial times in their lives, such as while paying off a home or putting children through university.
Whole life insurance is a permanent type of insurance, as it is in effect throughout the policyholder´s life. Whole life premiums are typically more expensive than term life insurance premiums; however, they are fixed throughout the contract´s duration.
Whole life insurance also includes a savings component, providing cash value that the policyholder can borrow against or withdraw under certain circumstances. This cash accumulates on a tax-deferred basis.
Canadians contemplating a switch from term to whole life insurance should consider the following aspects.
It´s safe to say that, when you initially chose your life insurance policy, you chose term insurance for a reason. Many clients go with term insurance because they are looking for coverage over a set amount of time with lower premiums.
Few people are not informed on the differences between permanent life insurance and term life insurance from the get-go. If this information slipped through the cracks and you are only now finding out about whole life insurance, then this may be a reason to convert.
If you were aware of permanent insurance but time has passed since you last thought about it, you may have undergone some life changes that will prompt you to consider converting to a whole term insurance plan today.
Most Canadian term insurance policies allow for conversion to whole life policies. Many policies will not require you to take a new medical exam when converting.
The conversion process is often easier than signing up for a whole new policy, and we´ve laid out the steps on how to do it here.
While most policies include a clause around conversions, you´ll need to confirm that your term policy is transferable into a whole life policy. Read through your contract or contact insurance professional Sim Gakhar today, and she will gladly assist you in analyzing your current contract.
The term conversion period refers to the time frame when your term policy is eligible for conversion to whole life insurance. While some policies may allow conversion at any time, others may restrict conversion periods. One example would be a 20-year policy that only allows conversion during the first 10 years.
If your policy is transferable and you´re within the conversion period, you would next call your insurance agent or Sim Gakhar to formally request the conversion.
An insurance specialist like Sim Gakhar will next send you a questionnaire to fill in a few details, and within a few days, you´ll soon receive the new permanent policy.
Navigating insurance policies can be tricky, but under the guidance of insurance professional Sim Gakhar, you know you´ll be in good hands. Reach out to her with any additional questions you may have about converting your term insurance policy, and she will be happy to help in any way she can.
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