What Is a Term Conversion Rider?

Updated: June 5, 2024

Advertising & Editorial Disclosure

A term conversion rider lets you change your term insurance to permanent life insurance before the term ends. This rider on a life insurance policy has the added benefit of expanding your coverage without new medical underwriting, which is beneficial if your health has declined. However, using this rider to convert your term insurance to a permanent policy will increase premiums.

KEY TAKEAWAYS ON TERM CONVERSION RIDERS
  • A term conversion rider allows your policy to transition from term to whole life insurance without new medical underwriting.
  • These riders offer financial flexibility, allowing policyholders to adapt to changing personal circumstances.
  • You can initiate the conversion process by contacting your insurance provider before the term expiry date and submitting the necessary documentation.
  • Remember that converting to a whole life insurance policy usually increases your premiums.

Term Conversion Rider Definition

A term conversion rider is an optional feature in term life insurance policies, offering a strategic bridge between term and permanent life insurance. Term insurance, designed to provide coverage for a specific period, contrasts with permanent or whole life insurance, which offers lifelong coverage and often includes a cash value component. This rider enables policyholders to switch from the temporary coverage of term insurance to more extended coverage with a cash value benefit found in permanent policies, like whole or universal life insurance.

How Term Conversion Riders Work

Using a term conversion rider is subject to specific terms set by your insurance company, including a time frame for when you can convert your policy. The premium for the new permanent policy will usually be higher than your term policy. However, the biggest benefit of using a term conversion rider is that you will not need to go under medical underwriting to turn your term life insurance into a whole life insurance policy.

This translates to a smooth transition to long-term coverage, ensuring you stay insured regardless of any changes in your health. To make this switch, you must contact your insurance provider within the allowed period, complete the necessary paperwork and agree to the new premium rates for the permanent policy.

Benefits of a Term Conversion Rider

A term conversion rider offers several benefits, including extending term life insurance and enabling a smooth transition to whole life insurance without requiring new medical exams.

    calendar icon

    Continuous Coverage

    A term conversion rider ensures you maintain life insurance coverage beyond the original term period, providing a safety net as health conditions change over time.

    insurance2 icon

    Seamless Transition

    You can convert from term life insurance to whole life insurance smoothly without needing new medical examinations, simplifying the conversion process.

    healthInsurance icon

    No New Medical Underwriting

    This rider in life insurance avoids requiring another medical underwriting, which is particularly beneficial for older adults or those with deteriorated health conditions.

    loanReview icon

    Additional Rider Options

    Enhance your coverage by adding other riders, like long-term care riders, to your new whole life insurance policies upon conversion. Having the right riders on your life insurance policies broadens the scope of your insurance protection.

Factors to Consider Before Using a Term Conversion Rider

Before utilizing a term conversion rider, it's wise to thoroughly assess its financial implications, understand the conversion process and explore your available coverage options. This ensures a well-informed decision that aligns with your long-term insurance needs and financial goals.

Key Considerations

find icon

Evaluate the new premium rates for the whole life insurance policy post-conversion, considering that whole life insurance premiums are generally higher due to lifelong coverage and cash value accumulation.

vsDocuments icon

Compare the new rates with other permanent life insurance options to ensure you make a financially sound decision.

methodology icon

Reflect on your current and future financial obligations to determine if the continued coverage aligns with your financial goals and needs.

doctor icon

Understand that one of the benefits of using a term conversion rider is the ability to bypass new medical underwriting, which can be advantageous if your health has deteriorated.

calendar icon

Check the timeline stipulated in your policy for utilizing the term conversion rider, typically before the term ends or reaching a certain age, to ensure you don't miss the conversion window.

insurance2 icon

Explore adding additional riders, such as long-term care or critical illness insurance, to your new whole life insurance policy post-conversion for enhanced protection. Remember that insurance riders help provide tailored and comprehensive coverage.


How to Convert a Term Life Insurance Policy to Permanent Coverage

Converting your term life insurance policy to permanent coverage using an insurance rider involves several straightforward steps. Let’s take a look:

1
Review Your Policy

Review your term life insurance policy for a term conversion rider and understand the specifics, such as the conversion timeframe, the new premium rates post-conversion and any additional requirements or options, such as features available upon conversion.

2
Contact Your Insurance Provider

Contact your insurer to let it know you intend to convert your term policy to a permanent one.

3
Submit the Necessary Documentation

Submit the necessary documents your insurance provider requires to initiate the conversion process, typically including a completed conversion application form and proof of identity.

4
Review the Conversion Terms

Understand the conversion terms, including the new premium amounts, coverage details and other available policy riders in life insurance.

5
Receive and Confirm Your Updated Policy Documents

Get the updated policy documents from your insurance provider, reflecting your new whole life insurance coverage.

FAQ About Term Conversion Riders

Learn more about the nuances of a term conversion rider through these answers to frequently asked questions and how they bridge the gap between term and whole life insurance.

What is a rider in life insurance?
Are life insurance riders worth it?
What is a term conversion rider?
When can you convert your term policy using a term conversion rider?
Will your premiums change if you convert your term policy?
What happens if you choose not to convert your term policy?
Do you need to undergo a medical exam to convert your term policy?
What is a rider on a whole life insurance policy?
Can you add a rider to an existing life insurance policy?

Related Content

Explore various types of life insurance, compare term and permanent policies and discover the intricacies of convertible life insurance to enrich your understanding of term conversion riders.

Life Insurance — This page is a robust starting point to grasp the broader context in which a term conversion rider operates, facilitating a nuanced understanding of the conversion from term to whole life insurance.

Short-Term Life Insurance — Explore the specifics of short-term life insurance and its contrast to other life insurance types. Understanding the temporary nature of short-term life insurance can provide a foundation for appreciating the longer-term coverage options facilitated by a term conversion rider.

Term vs. Permanent Life Insurance — Learn the differences between term and permanent life insurance, offering a clear perspective on utilizing a term conversion rider to transition from a term to a whole life insurance policy.

Convertible Life Insurance — Learn about the differences between term and permanent life insurance, offering a clear perspective on the transformation when utilizing a term conversion rider to transition from a term to a whole life insurance policy.

About Nathan Paulus


Nathan Paulus headshot

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.