Convertible Term Insurance should have a prominent place in your financial plan. So often, the question is: Whole Life or Term Insurance, which is better? The answer is, they both are suitable for different reasons and needs. In this case, you can have your cake and eat it too; you can have both! And when buying Term Insurance – Convertible Term is often the wiser choice. Let me explain why.
Term Insurance is life insurance coverage you buy on your life for a specific period – for example, 10, 15, 20, or even 30 years. It is the least expensive insurance there is, so it is often the choice for young families. Term Insurance is purchased just in case something happens; it seldom pays out a claim because it is typically purchased during the lowest risk years of someone’s Life.
So why would you want to purchase Convertible Term Insurance? Convertible Term gives you the flexibility to buy Term now and convert it to Whole Life insurance later without having to meet medical underwriting guidelines. This locks in your insurability! If your health changes or something else affects your insurability, you can still convert your Term Policy to a Whole Life Policy without any hassle or worry.
Whole Life covers you for your ENTIRE Life; if you pay your premiums and keep the policy in force, it will pay a death benefit when you die. They are many components that make Whole Life a valuable asset. You can build cash value, earn guaranteed interest, and receive dividends. Whole Life offers many more benefits than Term Insurance – but it is more expensive.
The first thing we always want to make sure of when talking with someone is that they have considered their Human Life Value and have the proper coverage in place. This means what their family or business would need based on the financial loss if they were to pass away. Convertible Term is a way to ensure you have all the coverage you need and have a “place holder” for when you may want a Whole Life plan. Someone may not be sure that they want a whole life policy, or maybe it is just not in the budget yet. Another great feature of convertible Term is it allows the policy owner to decide when and how much they want to convert. You don’t have to access it all – you are in control. All policies do have a stated time frame of when you can convert. For example, the conversion might be required to happen within the first five years of the policy, or you might need to convert by a certain age. Your advisor should make sure to explain the specifics of your policy so that you can take full advantage of the provisions.
Reasons to buy Convertible Term Insurance –
- It is a “place holder” – you know you want a whole life policy, but it’s just not in the budget yet.
- You want to lock in your insurability when you are healthy – life is unpredictable – one day you feel fine, and the next, everything changes. With convertible Term, you have a plan in place!
- You already have a Whole Life Policy and want to guarantee that you can buy more in the future. If you are practicing Infinite Banking and learn about the “Living Benefits” of a Whole Life Policy, you will want to buy more! A Convertible Term Policy ensures that you will be able to do just that!
- You want to protect growing income and assets. You may be early in your career or just purchased your first home but know that your income will continue to rise as well as the value of your assets. You can make sure that you will have the right amount of coverage in place for as long as you need it.
Contrary to popular belief, Insurance companies will not let you over-insure yourself. We find, most people tend to be underinsured. We believe that you should insure yourself for your full human life value – which is primarily driven by your income but also current age, planned retirement age, length of time needed, children’s ages, and so on.
While convertible Term is slightly more expensive than regular Term, it is very affordable and is more cost-effective than most people realize. If you are thinking you want/need life insurance but aren’t sure what to buy or can afford – do yourself a favor and get some convertible Term insurance in place from a mutual life insurance company.
You do not have to choose between Term and Whole Life Insurance – you can have a combination of policies; with the amount of coverage you want and need at a price that fits your budget.
Too often, we have seen people waiting to purchase life insurance, thinking a.) they have plenty of time, b.) they don’t need it, or c.) they’re too busy to talk to someone, then WHAM! life happens. A serious illness hits, and they are no longer insurable. This is why we say get the most coverage you can, now, so you have options in the future. Anyone who reads our blogs know we believe in using Dividend-Paying Whole Life Insurance to harness the power of the Infinite Banking Concept. It is how you can build a solid financial foundation that is not correlated to the stock market. It is a no-brainer for a portion of what you are doing. Owning a plan puts you in a cash position that will grow 4x faster than leaving your money sitting in a bank.
The market has always gone up, and it has always come down – but profits and gains are blinding. People forget just how bad it can be when a considerable portion of their hard-earned money is just gone. I can never understand why people think that there will not be another correction.
The great thing about Life Insurance is that it isn’t either/or; you can be in the market and hopefully realize some gains but also have a portion of your assets protected so you will not suffer catastrophic losses in the next crash. How great would it be to have a parallel plan in place when there is a market downturn and take advantage of buying opportunities instead of losing money and having sleepless nights? You can be in the power position of being pro-active instead of reactive.
Because of today’s low-interest-rate people believe cash has no value – but what if your money could earn a respectable rate of return, guaranteed? Plus, you would still have access to your capital for opportunities that come along. How does having a safe pool of money available to you when you need it, take away from your options? Why wouldn’t you want to take advantage of that?!
