Consider a convertible term policy if you’ll want lifelong coverage later
If you’re shopping for term life insurance, you might want the option to switch to a permanent policy in the future. Some people prefer to lock in lifelong coverage or find it helpful to use life insurance to build cash value.
Some term life policies offer a chance to convert your policy before the coverage period ends. Here’s how term conversion works and why you might want to consider this type of life insurance.
» MORE: Do you need life insurance?
What is convertible term life insurance?
Convertible term life insurance is a type of coverage that allows you to convert a term policy into a permanent policy. When you buy term life insurance, coverage lasts for a set period of time only — like 10, 20 or 30 years. With most insurers, you can convert your policy to whole life insurance or universal life insurance.
The majority of term life policies are convertible. Some policies have a built-in conversion provision, while others have a policy add-on called a term conversion rider.
Which policies can term life be converted to?
Many insurers allow conversion from a term life policy to any type of permanent life insurance. Others restrict conversion to certain types of policies such as universal life insurance. Here are a few reasons you might want to convert to particular types of permanent policies.
Converting term to whole life insurance
You might want to consider converting a term life insurance policy into whole life insurance if you're an adult with a health condition. This could help you lock in lifelong coverage without the need for a medical exam.
Converting term to universal or variable life insurance
You might convert term life into a universal or indexed universal life policy to build cash value at a faster pace. Maybe you’d like to provide an inheritance or you’re diversifying retirement savings after maxing out other options.
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How do convertible life insurance policies work?
There are a few things you should know about the process for converting a term life insurance policy.
⏰ There’s usually a conversion window outlined in the policy.
You might have a limited window of time to exercise the conversion option. Some policies require you to convert within the first 10 years, while others allow you to exchange your policy before a certain age, like 65 or 70. While the specific rules vary by policy, you’ll typically need to convert your coverage before the term expires.
🩺 You won’t need to take another medical exam.
You can usually convert your coverage without taking a new life insurance medical exam. This means you won't be penalized if you’ve developed new medical problems since you bought the policy.
💰 Your new premium is likely to be more expensive.
Permanent life insurance usually costs more than term life insurance. This is because it offers lifelong coverage and builds cash value. If you’re converting from term life, the insurer sets your rate based on your health when you bought the original policy and your age at the time of conversion. In other words, your age will affect how much you’ll pay, but the insurer won’t consider your health. The insurer may also charge a conversion fee.
📑 Not all term life policies are convertible.
To find out if your term policy is convertible, read the policy documents or contact your life insurance company. If you’re shopping for life insurance, be sure to ask about this feature before you sign the contract. Life insurance needs can change over time, and convertible policies give you flexibility to adjust.
➗ You can choose partial conversion of term life coverage.
Some insurers may allow you to convert part of your policy. That means you could keep some of your coverage as term life insurance and upgrade the rest to permanent life insurance. This approach could be a good fit if you want a policy that builds cash value before retirement. However, you'll still need affordable life insurance for a few more years to cover any large debts like a mortgage.
Show me how it works ✏️
How does partial term life conversion work? Say you have $500,000 in convertible term life insurance. You might be able to convert $250,000 of that coverage to a permanent life policy. This would leave you with $250,000 in term life insurance that you could either keep as is or choose to convert later.
Why would I want to convert a life insurance policy?
Here are some reasons you may want to convert a term policy to a permanent life insurance policy despite the higher costs.
To build savings tax-free
Part of the premium for permanent life insurance goes toward building up cash value, which grows slowly on a tax-deferred basis. You can borrow against or withdraw money from the cash value life insurance once you’ve accumulated enough. You can even give up the life insurance altogether for any existing cash surrender value. To compare, term life insurance has no cash value.
However, you shouldn't buy permanent life insurance unless you can stick with it for the long haul and have a long-term insurance need. Instead, max out contributions to tax-advantaged accounts and consider other investments first. Generally, it takes many years for the cash value to build substantially, and you may pay a surrender charge during the first few years of the policy. Known as the “surrender charge period,” this typically lasts 5-15 years.
You can afford it
You might have wanted some permanent insurance but balked at the price for universal or whole life. Now that you’re making more money, you’d like to buy some lifelong coverage.
Keep in mind that you should convert only the amount of coverage you think you’ll need. This means you may not have to convert the entire term life policy amount.
» MORE: Average life insurance rates
You have a lifelong dependent
Perhaps your needs changed and now you have a lifelong financial dependent, such as a child with special needs. Permanent life insurance can help fund a trust for that person after you die.
Before buying a policy, work with financial professionals who help clients with special needs children. A life insurance agent can help you calculate coverage needs and select the best policy. An attorney can assist with setting up a special needs trust.
You have a high-value estate
You made it big and have more money and property than you ever expected. The downside? Now you’re worried about the estate taxes your heirs will owe after your death. Permanent life insurance can help.
Work with an estate planning attorney and insurance agent who specialize in this area. The estate planning attorney will help you set up an irrevocable life insurance trust. The insurance agent will help you plan and select the right policy. It’s important to set this up correctly so that the death benefit is not subject to estate taxes. Your heirs can then use the life insurance proceeds to help pay the estate tax.
Did you know...
State estate and inheritance taxes vary. Federal estate taxes in 2026 are applied to estates worth more than $15 million, according to the Internal Revenue Service. Note that legally, a spouse doesn’t owe estate taxes on an inheritance from the deceased spouse.» MORE: Is life insurance taxable?
You have a health problem
The insurance company doesn’t consider your current health condition when you convert a term life policy. That’s an advantage if you’ve developed conditions that would make a new life insurance policy too expensive.
However, if you’re still healthy, get quotes for a new permanent policy and compare those with what you’d pay through conversion. Insurers may only offer one option for conversion, so compare with other companies to see if there are more competitive options.
Pros and cons of converting term life insurance
Pros
Lifelong coverage.
Ability to build cash value.
No medical exam needed.
Cons
More expensive premiums.
A fee may be involved.
When can you convert term life insurance?
Each insurer may have different rules about when you can convert, but it will always need to be before your term life policy ends. Some insurers specify a period of time at the beginning of the term policy while others offer conversion up to a certain age.
Here are some examples of how life insurance companies handle the conversion from term to permanent life insurance.
Insurer | Convertible policies | Conversion rules |
|---|---|---|
Term life → universal life. | Convertible up until age 70. Policies issued at age 66 are convertible for the first five policy years. | |
Term life → whole or universal life. | Conversion is allowed during the first five years of a term life policy period. | |
Term life → any permanent life policy. | EssentialTerm Value: Within the first 7 years or up to age 70. EssentialTerm Plus: Up to age 70. EssentialTerm: Up to first policy anniversary after 65th birthday. | |
Level Term → any permanent life policy. | Convert within the first five years of the term or anytime during the term with an Extended Conversion Rider (ECR). |
What’s the difference between term and permanent life insurance?
If you’re considering converting your term life policy, it’s worth noting the basic differences between these two kinds of life insurance.
Term life
Cheaper: Term life is generally the cheapest type of life insurance.
Temporary: Policies last for a set time period, such as 10, 20 or 30 years.
No cash value: You can’t borrow against or cash out a term life insurance policy.
Permanent life
Pricier: Permanent life policies are usually more expensive than term life insurance.
Permanent: Policies can last the rest of your life.
Builds cash value: Policies grow cash value and once you've built enough, you might be able to cash out or borrow against the policy.
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- 1.IRS. Estate Tax: Filing threshold for year of death. Accessed Sep 11, 2026.
