Texas General Lines — Life, Accident, Health and HMOLife InsuranceMedium
A client purchased a $500,000 convertible term life insurance policy 5 years ago. The policy is a 10-year level term. They now wish to convert it to a whole life policy. Which of the following statements is TRUE regarding the conversion?
- AThe new whole life policy's premium will be based on their original age at term policy issuance.
- BThe conversion must occur within a specified period, typically before the term policy expires.
- CThey must provide evidence of insurability at the time of conversion.
- DThe death benefit of the new whole life policy must be less than the original term policy's death benefit.
Show answer & explanationAnswer & explanation
Correct answer: B. The conversion must occur within a specified period, typically before the term policy expires.
A convertible term policy allows conversion to a permanent policy without evidence of insurability, but this option is typically only available during a specified conversion period, often before the term policy expires or by a certain age.
Why the other options are wrong
- A. The premium for the new whole life policy will be based on their attained age (current age) at the time of conversion, not the original age.
- C. Convertible term policies allow conversion without evidence of insurability, which is a key benefit.
- D. The death benefit of the new whole life policy can be equal to or less than the original term policy's death benefit, but does not have to be less.
Convertible Term Life Insurance
A term life insurance policy that allows the policyholder to convert it into a permanent life insurance policy without providing evidence of insurability.
- No evidence of insurability required for conversion
- Conversion must occur within a specified period
- New policy premium based on attained age
- Often more expensive than new term policy
Memory trick: Convertible term is your 'easy button' to permanent, but don't miss the 'deadline'!