By Tom Strangstalien, Insurance Advisor
As we celebrate the holiday season, we’re especially thankful for our loved ones. It’s the most popular time of year to reflect on our life insurance needs to determine whether we have the right coverage and enough coverage to protect our loved ones. The most common form of life insurance protection is term life, and a planning tool that often gets overlooked is the potential to convert your term life insurance coverage to some form of permanent life insurance, without any medical underwriting requirement. Unlike term insurance which either disappears or substantially increases in cost at the end of each term, permanent life insurance provides you with the peace of mind of knowing that it will be there for as long as you pay the premiums.
As with so many of our clients, I am the trusted insurance advisor for Katie, John and their family (names changed to protect confidentiality). One day I received a call from Katie because John’s mother, Anna, had suffered a severe and debilitating stroke. Anna and her husband had purchased a $1,000,000 term life policy from an agent several years ago to provide protection for their family. Katie indicated that in doing research into Anna’s finances she discovered that the term policy was about to expire. She asked if I could look into the coverage to make sure it could be in place for Anna’s lifetime as she was now completely uninsurable. Upon doing so, I unfortunately discovered that the conversion option had expired a few years ago. Furthermore, the policy was not guaranteed renewable and was about to expire within a year. Anna passed away a couple of years later and rather than receiving the intended $1,000,000 income-tax-free benefit, they received nothing. Had the policy been converted to a permanent plan during the allowed timeframe, the insurance benefit would have been available as desired for the family.
This is just one example of why you should at least explore your term life conversion options. You can consider whole life, universal life or even index universal life coverage if offered by the insurance company. These policies will be more expensive but have a cash component that can be utilized if the need for protection diminishes in the future. So why else would you consider converting your policy?
Do you want to provide a legacy for your family and loved ones in the form of an income-tax-free benefit? Perhaps your estate planning needs include a life insurance policy or some charitable planning by leaving a legacy to a treasured institution, scholarship fund or community entity? This type of planning has the potential of also providing a significant tax benefit. No matter what your future holds, if your policy contains a current conversion privilege, you can make the change, regardless of our current health or health history.
Early in his career as a physician, Brad (pseudonym for privacy) had purchased an inexpensive term life policy in the amount of $5,000,000. Brad experienced a significant change in health and contacted me to determine what options may exist for life insurance protection, since leaving an income-tax-free gift to his family was extremely important to him. He was now uninsurable, however his term life insurance policy did contain a conversion option. We did extensive planning, and though we did reduce the life insurance amount somewhat, we were able to provide a whole life policy that would be paid up requiring no further premium payments at retirement. Brad is so thankful that the coverage will be guaranteed for his family as he had originally planned!
Now is the perfect time to research your life insurance coverage and your options. This is exactly what my team at WisMed Assure does! We are dedicated experts with our allegiance solely to you and your loved ones. Please reach out to us with no expectations or obligations and take care of your life insurance planning, especially to determine if converting your current term life policies makes sense in your life.
Contact the WisMed Assure team at insurance@wismedassure.org, complete this quick online form or call 608.442.3810.
Note: This article is for informational purposes only and should not be considered as insurance advice related to your specific policy or situation. Please consult with a qualified insurance advisor or professional before making any policy decisions. Full disclaimer and contact information.