Term Life Insurance Lapsing?
4 months ago Ted Bernstein 0
Do you know how the conversion deadline in your term life insurance policy works?
One of the most critical dates in a term life insurance policy is the conversion deadline. You don’t want the conversion deadline to pass without consideration. Insurance companies DO NOT notify you as the deadline is approaching. Many people who purchased term life insurance within the past 20 years may not understand their options. Term life insurance lapsing because of health reasons or affordability can create problems for families and businesses. Too many inforce policies do not allow you to convert the policy in all years without new evidence of insurability. To avoid finding yourself with limited options after the deadline has passed, speak with an insurance professional.
Why would I convert my term policy?
To continue a term insurance policy after your health has changed, the conversion option is key. You may never need to convert your term policy to permanent insurance but if you have a significant health problem after purchasing the term policy, you may fall into the rated or un-insurable category. When this happens, that conversion deadline becomes critical. Conversion may be your only option to continue life insurance with premiums based on your previous good health. Unfortunately, there are millions of people in this situation, unable to convert because the deadline expired. For example, if you own a 20 year term policy, it may only be convertible in the first 10 years or until age 65.
What do I do now if I own a term policy?
You want a policy with no conversion deadline or the longest one possible, something like 80% of the guaranteed term period. It is equally important to buy from a company that allows you to convert to their entire portfolio of products. Some companies limit their term conversions to only one policy, often not their best. Terry Savage offers some great advice in her recent column about term life insurance lapsing because of unknown conversion deadlines.
Can I buy a term policy with Living Benefits?
Living Benefits may be the single most important enhancement to the value of life insurance in the past several years. At no additional premium, the Living Benefits allows you to draw against the face amount of your policy when you have a critical, chronic or terminal health event. It is not a loan and there does not have to be any cash value in the policy. It is an advance and it comes from the face amount. You can receive up to 90% of the face value depending on the severity of the health incident.
If you currently own life insurance, chances are good that it does not have Living Benefits. Adding Living Benefits and knowing the conversion deadline are two good reasons to review your current coverage.
Life Insurance Awareness Month is every September. We offer state of the art solutions for life insurance and lifetime income annuities. Let us help you minimize your premiums and maximize the value of your coverages. Please call us at 561-869-4500 or email me at TB@LifeCyclePlanners.com. Upon request, we will send an overview of Living Benefits.
Also published on Medium.