If you buy life insurance, read through the documents provided to you. It is essential to learn all terms and conditions. Most policies have some fairly difficult language. It can be confusing without some help from your agent. The conversion privilege is one area you need to consider. It is the ability and time limit you have to make changes to your policy. It is critical to understand how this applies to your situation. The problem is, a few definitions may apply. Here is a closer look.
Renewing or Updating Your Policy
The most common way a conversion privilege applies occurs when it comes time to renew or update a policy. It is common, for example, in term life policies.
In this type of policy, the plan is in place for a set number of years. At the end of that term, the individual has to make a decision. This is the conversion privilege. It helps you determine the future of your policy. Here are a few examples:
- You may no longer need the insurance. You decide to cancel the policy. Your coverage ends. You no longer have protection.
- You decide to renew the same coverage. During this period of time, you may be able to renew the policy for less money. You may be able to avoid some of the increased costs associated with obtaining life insurance at an older age.
- You decide you want to change your policy. You want more coverage or less. You want to convert from a term life insurance policy to a whole life insurance policy, for example. This period allows you to do so with ease.
Keep in mind that the conversion privilege helps to protect you. If you let your life insurance lapse, obtaining a new policy will likely cost more. You are older than you were. You may have a few health issues now you did not have when you obtained your original policy. You might wind up having to pay more because of the increased risks.
During the conversion privilege period, those risks are less impactful to your ability to get coverage and how much you will pay for it. In other words, you likely won’t face a full re-evaluation of risks, which might otherwise drive up your costs.
- To recap, conversion privilege applies to:
- The ability to convert your policy into a new one
- The ability to maintain your low risk factors to help you maintain a lower-costing policy
- The time limit you have to take action
Please contact us at ESG Insurance Solutions to discuss your particular situations and receive a free review of your conversion opportunities with your existing policies or to discuss securing new coverage with conversion options. Find out what your requirements are. Be sure to act as soon as possible to make these decisions. Otherwise, you may lose your opportunity to secure the lower cost you need.