Not All Term is Created Equally

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.