Conversion from Term Life Insurance to Permanent Life Insurance- Part 1

People have always asked me "What's better- term life or whole life (permanent) insurance?" This is a difficult answer to a seemingly easy question. Let's look at the basic differences between these basic types:

Term life is designed for maximum coverage at a lower premium for a set period of years (e.g. 10 to 30 years). The insurance companies generally require a minimum policy of $100,000 coverage. At the end of the term period, the premiums paid skyrocket astronomically. Most people just walk away from this scenario and either shop for another term policy or carry no insurance at all. 

Permanent insurance (Whole or Universal Life) set premiums at a pre-determined amount which is designed to carry coverage for a person's lifetime, or when coverage may no longer be needed. Obviously, the premiums would be more, but in the long run, there will be noticeable  premium savings.

A real life application would be the difference between renting an apartment as opposed to buying a home. Renting requires little cash outlay and the responsibilities of paying taxes, utilities and repairs are not required. Buying a home requires a larger cash outlay and all responsibilities of home ownership. 

The big advantage between renting and owning your living space would be home equity. Same for life insurance!

So, what to do?  If you make a decision to purchase term life insurance, select a company which has automatic rights to convert the term policy to a quality permanent policy.  All conditions when the original term policy was purchased  will carry forward to the permanent policy selected. 

The next topic (Part 2)  will cover the process of converting your term life insurance to permanent. And there is a lot to consider!