Not All Term is Created Equally
By Alan Friedman
When it comes to purchasing term insurance cheaper does not always mean it’s better. Low-cost term is great unless you want to convert your policy to a competitive permanent product in the future.
The convertibility of a term product is an important thing to consider when recommending a term product to a client. The conversion feature allows the client to exchange their current term product to a permanent plan of insurance without any new medical underwriting. It preserves the original underwriting class at the time of issue.
In addition, it is important to consider what is the choice of products available to convert to at the time of conversion.
There are companies that only offer one product
There are companies that have some very expense and non-competitive choice
There are companies that have a full range of products to choose from with no restrictions.
We have a number of competitive products to choose from. What product should you recommend?
Reach out to your marketing representative, they can help you.
Banner
Convertible for the duration of the level premium period or up to attained age 70, whichever comes first. Policies issued at age 66 or over are convertible during the first five policy years.
One conversion product
Corebridge
Convertible for the duration of the level term period up to an attained age of 70
Any Universal Life product offered
10 year term – prior to the 8th policy year.
Term period greater than 10 years – prior to the 10th policy year.
After the periods above, currently only two products are available: Protection Extend or American Elite Whole Life
Hancock
Up to the earlier of the end of the level term period or the policy anniversary nearest age 70
Convertible in policy years 1 -4 to any permanent product available for sale.
Year 5 to the end of the level term period to a designated conversion product only
Lincoln
Convertible for the duration of the level term period up to an attained age of 70
Policy years 1 -7 convertible to any product offered available at the time of conversion
Policy years 8+ convertible to a limited portfolio
United of Omaha
10 year term – earlier of 10 years or age 75
15 year term – earlier of 15 years or age 75
20 year term – earlier of 20 years or age 75
30 year term- during first 20 years only
Policies issued ages 73+ are able to convert during the first 2 years only.
All permanent products
North American
Earlier of age 70 or
10 year term – first 7 years
15 year term – first 12 years
20 year term – first 15 years
30 year term – first 20 years
Pacific Life
Convertible anytime to during the level term period up to the attained age of 70
One conversion product. Commission incentive if converted in the early years
Principal
Earlier of age 70 or
10 year term – first 7 years
15 year term – first 12 years
20 year term – first 15 years
30 year term – first 20 years
With Extension Rider convertible for the full term period up to age 70
All permanent products
Protective Life
Classic Term Choice
Convertible during the first 5 year up to age 70 to the full portfolio of products, otherwise:
10 year term – up to 8 years
15 year term – up to 13 years
20, 25, 30, 35 and 40 year term up to 18 years only to either ProClassic Legacy or Protective Non-Par Whole Life.
Custom Choice UL
Convertible during the first 20 years up to age 70 to the full portfolio of products
Prudential
Convertible to the lesser of the level-premium period or the first policy anniversary on or after the insured’s 65th birthday, but at least 5 yrs.
All permanent products
Securian
10 & 15 year term – first 5 years to age 75
20 & 30 year term – first 10 years to age 75
With Extension Rider – full level term period or age 75 if sooner. With out ECA the minimum conversion period is 5 years.
Symetra
Earlier of the 10th policy anniversary or policy anniversary following the insured’s 70th birthday
All permanent products
Case Study
Male age 45 purchased a $1,000,000 15 yr term at Preferred Non-Smoker rates. Five years after the purchase, he had a life changing event which left him uninsurable. He was able to convert his term to a permanent plan of insurance extending the length of his coverage while keeping his Preferred Non-Smoker rate class
Six reasons you need to pay attention to conversions:
Lock in your client’s insurability for a longer time. What happens if they get sick or have a medical issue later in life?
Reduce your own liability: Agent may be subject to liability if they sold something that did not protect client’s INSURABILITY.
Help clients manage finances by locking in low cost term today and stepping up to a permanent policy as soon as they can afford it in the future.
Tee up future sales and future advisor income by having regular policy reviews and discussions about conversions.
Set up client for future life settlements by selling longer conversion periods.
Take advantage of special conversion options like converting two policies to a survivorship plan – or a partial conversion, splitting policy into some term and some permanent coverage.