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What is a term conversion?

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Term insurance policies are only designed to last a certain length of time, called a term. Once that period ends, so does the coverage.

Policyholders can then choose to extend coverage after a term ends by either purchasing a new policy or converting a qualified term insurance policy to a permanent one. Converting to a permanent, whole life policy is an ideal option if you decide you want financial protection for the rest of your life.

What is a term insurance conversion?

A term conversion is when all or some of your term insurance policy is converted into a permanent life insurance policy (e.g., a whole life or universal life policy). Most term life insurance policies include a conversion option for free. This option means that if you decide you want permanent life insurance you can convert regardless of your health as long as you convert before the deadline listed on your policy.

» Compare: Term life insurance quotes

Benefits of a conversion option:

  • You maintain the original health rating from the term policy when you convert, even if you have health issues or become uninsurable.
  • You can decide when and how much of the coverage to convert (as long as it’s before the conversion expiration date.)
  • You can start building cash value with the new permanent policy.
  • You can opt to have life insurance coverage for your entire lifetime.

What is a partial term conversion?

A partial term conversion is when you take a portion of your term policy and convert it to a permanent policy. In doing so, you now have two separate policies.


You have a $500,000 20-year term insurance policy. You’ve owned it for nine years and are still within the company’s 10-year conversion deadline. You decide to convert $50,000 into a permanent life policy.

You now have two life insurance policies: a $450,000 term policy with 11 years left, and a $50,000 permanent policy that provides you lifelong coverage.

If you only convert a partial amount, your new term policy premiums then reflect whatever coverage amount is left on your term policy. For example, if you were paying $20 per month for a $500,000 term insurance policy and then you decide to convert $250,000 to a permanent policy, your term premiums will then drop to $13 per month, the cost of having a $250,000 policy.

Not sure how much term life insurance you need?

The main reason you would do a partial term conversion is if you could not afford the premiums on a full conversion or don’t require the full amount converted to a permanent policy. Keep in mind if you do a partial conversion, your term policy must still meet the plan’s minimum face amount.


You have a $200,000 term policy with a minimum face amount of $100,000. If you convert $150,000 of the term to a permanent policy you lose the remaining $50,000 because it is not enough to reach the minimum face amount.

Many companies give you the option to convert different amounts at different times. This can help offset the costs of moving from term to permanent insurance. Though, it is important to note that not all life insurance companies allow partial conversions.

A term conversion is when all or some of your term life insurance policy is converted into a permanent life insurance policy (e.g., a whole life or universal life policy).

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How does a term conversion work?

Each term conversion rider has an expiration date. This expiration date varies by company and product. You have until this expiration date to convert your term policy into a permanent policy without needing to go through underwriting again; however, your age will be considered.

You have the option to convert either based on your current age (called attained age) or your age at the time you took out the term policy (called original age). If you convert based on your current, or attained, age, the cost of insurance will be more expensive, but you will not have to pay a lump sum at the time of issue. If you convert based on original age, you will have to pay all back premiums and interest when you convert, but the yearly cost of insurance will be cheaper. You can discuss with your Quotacy agent which option would be best for you.


You’re 50 years old and are converting your 20-year term insurance policy. You convert based on original age. You purchased your term policy when you were 30 years old, so the underwriters base the price of your new whole life policy off the age 30. This means your premiums are quite a bit cheaper compared to a whole life policy based off your true age of 50.

At time of issue you need to pay the insurance carrier an amount equal to the difference in price between the term policy and what the premium payments would have been had you bought a whole life policy in the first place.

20 Years of Whole Life Premium

– 20 Years of Term Premium
= Lump Sum Due to Carrier

Note: By converting to a permanent policy, your premiums will be approximately 10-15x higher compared to your term policy premiums. Converting from a term to a permanent policy will raise your premiums because permanent insurance is more expensive. However, if you need more life insurance and have since developed health issues, converting to permanent will likely be cheaper than applying for a new term policy altogether because at that point your health will be taken into consideration.

Questions? Talk with our experienced advisors.


Another difference—other than the cost—between term and permanent life insurance is how much coverage you typically need. With term insurance, you are usually aligning your term length in time with the years of your life in which you have the most debt, e.g. a mortgage, raising children, college tuition, etc. If you end up wanting to convert into permanent insurance, you likely won’t need as much coverage. Your children may be near adulthood and your mortgage is much closer to being paid off.

» Calculate: Life insurance needs calculator

Let’s take a look at some examples to get a better grasp of term conversions.

Example 1

Jane Smith purchased a $1,000,000 20-year term insurance policy at age 30 when her son was 5 years old. At age 35, she is diagnosed with breast cancer. Her doctors are optimistic, but she does not want to risk a recurrence happening later on in life after her term policy terminates.

Because her policy has a term conversion option, her medical diagnosis does not matter since she does not have to prove insurability. She decides to convert $250,000 into a permanent policy.

She now has a $750,000 term policy (with 15 years left until it terminates) and a $250,000 permanent policy which she will have her entire lifetime to ensure her son will be financially stable, have the funds to pay for any medical bills she may accumulate, and cover the cost of a funeral when she dies.

Example 2

John Doe is 27 years old and has a 30-year $250,000 term insurance policy through Insurance Company ABC. He purchased it mainly to cover his funeral costs and mortgage so his wife would not be left covering these expenses by herself if John dies prematurely.

At age 35, he and his wife have their first child. He then decides to convert $50,000 into permanent insurance to ensure there will be funds available for his child in the future. He now has a $200,000 term policy (with 22 years left until it terminates) and a $50,000 permanent policy.

At age 37, he and his wife have a second child. He decides to convert another $50,000. He now has a $150,000 term policy (with 20 years left) and two separate $50,000 permanent policies.

Example 3

Eliza Johnson purchased a 20-year $250,000 term insurance policy when she was 30 years old. At the time, she was overweight and had adult onset Type 2 diabetes. Because of her health issues, the best risk class she could qualify for at the time was Standard Table 4. Table 4 is eight classes below the best possible risk class (Preferred Plus). Her monthly premium for this policy is $40.

Now ten years later, Eliza has a family including two children. She would like to have life insurance coverage for a longer period of time.

Her policy does include a term conversion option; however, Eliza is now at a healthy weight, has normal blood glucose levels, and her risk of diabetes complications is much lower. She has been sustaining a healthy weight and optimal blood pressure, cholesterol, and glucose levels for five years.

If she were to convert her policy into a permanent policy, her Standard Table 4 risk class would carry over. This would equal out to be very high premiums.

Instead, Eliza decides to apply for a new 20-year $250,000 term policy. Even though she is now ten years older, her health has significantly improved to allow her to qualify for Standard ratings. Her monthly premiums would then be approximately $30. In this case, it would make more sense for Eliza to apply for a new term policy versus converting to a permanent policy.

Here is a quick summarization of term conversions:

  • Whatever risk class you were approved for when you purchased the term policy, you keep when you convert, even if your health has deteriorated.
  • Your current age will be considered when determining your new permanent policy’s pricing, unless you opt for original age and pay a lump-sum.
  • Your policy premiums will be more expensive when you convert into a permanent policy.
  • Some insurance carriers require a minimum amount of coverage to be left on the original term policy if you are doing a partial conversion.
  • Each life insurance carrier has their own restrictions regarding when you can convert. For example, some carriers don’t let you convert within the first five years, some only let you convert within the first twenty years, and some will let you convert at any time.
  • Life insurance carriers set a maximum age for when you can convert. For most carriers, this age is either 65 or 70.

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If you have a term insurance policy and your conversion expiration date is approaching and you want to be insured for a longer period of time, you have two options: convert to a permanent policy or buy a new policy.

If you are still as healthy as you were when you took out the policy (or maybe healthier now?), you may want to investigate the cost of a new policy versus converting into a permanent one. With a new term policy, you won’t have access to accumulating cash values like permanent policies offer, but you can be insured for another term at a significantly lower cost compared to permanent insurance. However, if your health has deteriorated even in the slightest, you are an ideal candidate for converting.

Most of the life insurance companies Quotacy works with include the term conversion option automatically on their life insurance products. Some insurance companies forgo this option in order to make their process faster and premiums a little cheaper.

When you shop for life insurance through Quotacy, you’ll be able to see which life insurance companies offer the option to convert into a permanent policy before you apply. If you would like assistance choosing the best policy for you, our Quotacy agents can help. Compare affordable term insurance quotes online at Quotacy to discover how much you can save with a convertible policy and be prepared for the unexpected.

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Key Takeaways

Term conversion options are included in many term life insurance policies for free. If you decide you no longer want term life insurance and instead rather have permanent life insurance, a term conversion allows for this change.

The years in which you can convert and the products you can convert to will vary depending on your specific policy. Some companies also have minimum and maximum face amount requirements when converting.

Permanent policies cost much more than term policies, so be aware that your premiums will increase significantly if you choose to convert.

Watch the Term Life Insurance Conversion Video

Video Transcript

Welcome to Quotacy’s Q&A Friday where we answer your life insurance questions. Quotacy is an online life insurance agency where you can get life insurance on your terms.

I’m Jeanna and I’m Natasha.

Today’s question is: What is a term conversion?

A term conversion is simply when you take a term life insurance policy and change, or convert, it into a permanent life insurance policy.

Can anyone with a term policy do this?

Most term life insurance policies do include conversion options for free, but not all of them, and depending on the life insurance company, these conversion options have different expiration periods.

For example, some term policies let you convert within the first 5 years, some would in the first 20, and some at any point.

Exactly; and the benefit of a term conversion is that if you buy a term life insurance policy and then decide you want lifelong coverage, you can convert that policy into a permanent policy to get that lifelong coverage and the insurance company will not make you go through underwriting again. And not having to go through underwriting again means that if any health issues have popped up between now and when you first bought your policy, they won’t matter.

So, for example, if you’re 35 years old, you just bought your first house, and you buy a 30-year term life insurance policy to protect your family while you’re paying off that mortgage and 5 years into that policy you’re diagnosed with cancer, you can now take that term policy convert it into a permanent policy for lifelong coverage and the insurance company cannot increase your premiums or decline you based on that cancer diagnosis.

But converting will raise your premiums.

Right, but not because of any health factors. Your premiums may increase because your age is still considered when you convert and because permanent insurance, in general, is more expensive than term life insurance.

So for someone who buys a term life insurance policy, but then later on decides they want more coverage, converting to a permanent policy is a great option.

Definitely. Conversion options are great benefit for policyowners. So if you’re looking to buy a term life insurance policy, be sure to ask your agent if it includes a conversion option.

And if you’re shopping with Quotacy, you’ll be able to see all the policy options before you choose. You can always call, email, or chat our Quotacy agents if you have any questions regarding buying a term life insurance policy.

If you have any questions about life insurance leave us a comment. Otherwise, we’ll see you next week when we talk about how living in a community property state can affect buying life insurance. Bye!

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About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius

Marketing Content Manager

Natasha is a writer and content editor at Quotacy. She is also co-host of Quotacy’s YouTube series. She can't get enough of life insurance and outside of work is also working toward her Chartered Life Underwriter designation. Connect with her on LinkedIn.

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