What Is Convertible Term Life Insurance?

Convertible term life insurance gives you the option to convert to a permanent policy once your term expires. Is it right for you?

Audrey ZadaAudrey Zada
convertible term life insurance

Life insurance is a powerful way to help financially protect your family if the unexpected were to happen. While there are many different types of life insurance, term life insurance is one of the most popular—and affordable—options.

That’s one reason why Lemonade offers term life insurance, which might be a convenient and economical option for you. There aren’t a ton of moving parts, and the application process is 100% digital, with no medical exam required. If you’re interested, just click below to get your quote rolling!

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That said, we want you to be informed about your full array of life insurance options. A traditional term life policy provides coverage that lasts for a set period of time before expiring, and you aren’t able to build savings over time via a cash value component.

Convertible term life insurance offers the benefits of both term life insurance and permanent life insurance. Here’s what you need to know about this type of policy (which, bear in mind, Lemonade does not offer).

What is convertible term life insurance?

A convertible term life insurance policy gives you the option to convert your existing life insurance policy into a permanent policy at the end of your term length. In most cases, you won’t need to go through another medical exam. 

It works similarly to a standard term life insurance policy, offering protection (and set premiums) for a specific period of time, usually 10, 20, or 30 years. If you pass away during the term period, your beneficiary will receive a lump sum death benefit.

Some term life insurance policies will have a rider that allows you to convert your policy. At the end of the term, the policyholder has the option to either renew the policy for another term or convert it to a whole life insurance policy or another type of permanent life insurance that won’t expire as you get older.

Okay, so what’s permanent life insurance?

Permanent life insurance gives you permanent coverage until your death—shocking, we know—as long as you keep paying your monthly premiums.

  • Whole life insurance is a type of permanent coverage. It comes with a savings feature that lets you accrue cash value, which grows over time. The policy owner can borrow from the cash value of the whole life insurance policy while they’re still living, in order to cover daily needs or big expenses. 
  • Some other types of life insurance, like universal life insurance, come with a guaranteed minimum interest rate and invest your cash value in the stock market, though you don’t have a choice on where your money is invested.

You may find that buying a more affordable life insurance policy—and investing the savings on your own—may be a better bet. In any case, it’s a conversation to have with your financial advisor.

Are there benefits of convertible term life insurance?

Convertible term life insurance may be beneficial for those who want additional security without paying higher premiums, with the flexibility of being able to upgrade your protection once your original policy expires.

This type of policy offers advantages over outright purchasing permanent life insurance, including lower premiums that are typically fixed for a predetermined length of time, the ability to switch coverages at the end of the initial policy period, and greater coverage options. 

Converting your term life insurance policy into a whole life insurance policy can be a great option for those looking for long-term security or to get more value from their life insurance policy. It can be a way to reduce expenses now—via lower premiums—while still having the flexibility needed to change your life insurance coverage in later years. 

Plus, with a convertible insurance rider, you typically can convert your term life insurance policy into a permanent life insurance policy without going through another underwriting process and taking a medical exam. 

What are the downsides to convertible term?

Let’s be fair, there are some downsides to convertible term policies. Let’s run through them:

  • Your premiums will be higher, as they’re based on your age at the time of conversion
  • The older you are, the higher your premiums typically will be
  • Permanent life insurance is much more expensive than term life insurance, which means your new premiums will be much higher after you convert

Should I get convertible life insurance? 

This is a good question for your financial advisor. In general, you should consider purchasing convertible insurance if you’re concerned that you may need more financial protection later in life. 

If you’ve recently developed a chronic illness or are worried about potentially developing health issues, converting your policy to a permanent policy can ensure long-term coverage. 

What is convertible term life insurance?
A financial advisor can help you decide the best policy for your needs.

What’s more, it’s very likely that your situation will have changed since you first bought your policy and you may need more or different coverage. If you’re not sure how long you need protection or are concerned about the cost of renewing your policy down the road, having a convertible policy may be right for you. 

Keep in mind that just because you have a convertible policy doesn’t mean you’re required to convert it to a permanent policy. If you don’t need coverage anymore, you can let your policy expire. Or, you can renew your term life insurance policy or purchase a new policy altogether. Consider shopping around and comparing both rates and coverage to find an option that works for you. 

How to convert your policy

If you already have a term life insurance policy, you may have a provision allowing you to convert your policy when your term is up. (Again, this is not the case with Lemonade’s term life offering.)

Your insurer will be able to advise on whether you are eligible, as well as any associated costs and conditions related to making the conversion. You typically only need to convert your policy before a specific date, otherwise your policy will expire. 

Each insurance company has its own standards for how term conversion works, but typically you’ll have a few options, including when the conversion period is, the type of insurance you can convert to, and if partial conversions are allowed. 

Some insurers allow you to convert your policy before your term expires, for example once you reach a certain age or on your policy’s 10th anniversary. You also may have the option to convert your term policy into a number of different permanent life policies, including whole life insurance and universal life insurance. Lastly, some companies will allow you to convert only part of your policy to a permanent one, though there’s typically a minimum amount. 

Keep in mind that when you convert your policy to a permanent policy, your premium payments will likely become more expensive, though it will typically be more affordable than if you went and bought an entirely new policy.

What’s the best life insurance option?

The best life insurance policy is the one that fits your unique personal financial situation and needs.

Convertible life insurance may be a good fit for you. But if you’re interested in pursuing a more traditional term life policy that’s 100% digital and doesn’t require a medical exam, feel free to explore Lemonade’s offering!

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A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states.


Please note: Lemonade articles and other editorial content are meant for educational purposes only, and should not be relied upon instead of professional legal, insurance or financial advice. The content of these educational articles does not alter the terms, conditions, exclusions, or limitations of policies issued by Lemonade, which differ according to your state of residence. While we regularly review previously published content to ensure it is accurate and up-to-date, there may be instances in which legal conditions or policy details have changed since publication. Any hypothetical examples used in Lemonade editorial content are purely expositional. Hypothetical examples do not alter or bind Lemonade to any application of your insurance policy to the particular facts and circumstances of any actual claim.