Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
No. Unfortunately, conversion is a one-way street. You can convert term insurance to permanent insurance but cannot convert permanent insurance to term insurance.
If you're looking to get out of a whole life policy but still secure coverage at a lower price, you can look at completing a 1035 rollover into a Guaranteed Universal Life policy. It's another permanent insurance program that minimizes the buildup of cash value to keep the premium at the lowest possible level with premiums and death benefits fixed and guaranteed for life. The 1035 rollover portion takes the cash value inside the whole life policy and applies it to the first year premium for the Guaranteed Universal Life policy to lower the premium even further. This can be a very valuable alternative course of action that is definitely worth considering.
If you have a participating whole life policy, then the dividends paid by the program can be used to purchase paid-up additions to the policy (little amounts of paid-up coverage that accumulate over time that do not require additional premiums for the policy).
I hope the information is helpful. Please feel free to contact me for help with your coverage and if you have any other questions (you can reach me via the "contact me" button next to my name). There are no fees for my services - all quotes are provided at no cost to you. Thanks very much.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Jason has a good option for you. I have another consideration: reduced paid-up insurance. You can ask your carrier how much coverage they will guarantee if you stop paying premiums now. It will be less than you now have, but if that is okay, then you won't have to go through underwriting again for a new policy.
It all depends on how much coverage you need, and for how long. And - importantly - what rate you could command if you bought a new policy. To determine that, you should get prequalified. Make sure you know the company, product, and price before you formally apply.
Typically, it only goes the other way when you can convert term to permanent or whole life. There are options mentioned above. The easiest way is to convert the cash value to paid up life insurance which will act like a paid up term life at a smaller face amount. However, reading between the lines it sounds as if you need to increase your face amount. If you have lost your insurability and needing more coverage, check with your agent that sold you the whole life plan. Some plans do have previsions to purchase more insurance during a certain period of time without proof of insurability. If you still have your health you may be better off to purchase a separate term life plan and leave your whole life policy the way it is for now.
Principal Agent, Patriarch Associates,LLC, Opelika, Alabama
Traditionally, you cannot convert a whole life policy to term. However, one of three options is available to you if you decide you no longer want whole life coverage. One involves converting a whole life policy to an extended term policy. This uses present cash value of the policy to cover the cost of an extended term policy of the same face value. This new coverage only lasts as long as there is sufficient cash value to sustain it. It is usually specified in the policy in terms of the amount of cash value relating to a specific term of coverage. For example, if you have a policy with a $25,000 face value and $2,000 cash value, this illustration will show how long $2,000 will cover the cost of an extended term policy of $25,000 face value. Whether the term is 3 years, 5, or 10 years, coverage ends when the $2,000 runs out. Just FYI, the other two options are paid up insurance of a lesser face value (whatever amount $2,000 will purchase), or a lump sum payment of the $2,000 to the policy owner.
No. If you have Whole Life and would rather have Term insurance, you could go a couple directions.
1) Keep your whole life and purchase an inexpensive term policy to go with it.If you have been paying on your whole life for a long time, you may be able to quit paying premiums and still have a nice policy to keep for the rest of your life. You will probably never be able to purchase a new whole life policy as cheaply as the one you have now.
2) Surrender your whole life and buy a new term policy. You may have some cash from your whole life that you can put toward your term policy. However, you cannot buy term with a single premium - it must be on a pay period (monthly, quarterly, semi-annually, or annually). So if you want to trade one for the other, put the money of the whole life somewhere where you won't be tempted to spend it on other things.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
You can stop paying the premium on your existing whole life policy. The policy contains a table of non-forfeiture options. One of the options is “extended term insurance” on most policies. That table will tell you how long your current policy can provide a guaranteed death benefit without additional premiums. That option is risk-free and expense free.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Yes, it can. As mentioned above, it’s called reduced paid up term. You get a lower death benefit for as long as the cash inside the policy lasts.
However, I am not sure this will solve your problem. People often ask this question because they have “whole life buyers remorese.” They bought the policy because of the allure of the cash value, but then realized it wasn’t worth it. They were paying too much money for not enough coverage, and the cash they would be accumulating wouldn’t make that much difference in their overall wealth picture.
If this is the case, then reducing the whole life to paid-up term may not give you the coverage you need for as long as you need it. You might want to consider purchasing a stand-alone term policy with the face amount and guarantee period that will get the job done.
If you are concerned about qualifying for a good rate due to a medical or lifestyle issue, then make sure you are dealing with a broker who can place that type of case. You still may be able to get a very reasonable price.
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If you're looking to get out of a whole life policy but still secure coverage at a lower price, you can look at completing a 1035 rollover into a Guaranteed Universal Life policy. It's another permanent insurance program that minimizes the buildup of cash value to keep the premium at the lowest possible level with premiums and death benefits fixed and guaranteed for life. The 1035 rollover portion takes the cash value inside the whole life policy and applies it to the first year premium for the Guaranteed Universal Life policy to lower the premium even further. This can be a very valuable alternative course of action that is definitely worth considering.
If you have a participating whole life policy, then the dividends paid by the program can be used to purchase paid-up additions to the policy (little amounts of paid-up coverage that accumulate over time that do not require additional premiums for the policy).
I hope the information is helpful. Please feel free to contact me for help with your coverage and if you have any other questions (you can reach me via the "contact me" button next to my name). There are no fees for my services - all quotes are provided at no cost to you. Thanks very much.
It all depends on how much coverage you need, and for how long. And - importantly - what rate you could command if you bought a new policy. To determine that, you should get prequalified. Make sure you know the company, product, and price before you formally apply.
1) Keep your whole life and purchase an inexpensive term policy to go with it.If you have been paying on your whole life for a long time, you may be able to quit paying premiums and still have a nice policy to keep for the rest of your life. You will probably never be able to purchase a new whole life policy as cheaply as the one you have now.
2) Surrender your whole life and buy a new term policy. You may have some cash from your whole life that you can put toward your term policy. However, you cannot buy term with a single premium - it must be on a pay period (monthly, quarterly, semi-annually, or annually). So if you want to trade one for the other, put the money of the whole life somewhere where you won't be tempted to spend it on other things.
However, I am not sure this will solve your problem. People often ask this question because they have “whole life buyers remorese.” They bought the policy because of the allure of the cash value, but then realized it wasn’t worth it. They were paying too much money for not enough coverage, and the cash they would be accumulating wouldn’t make that much difference in their overall wealth picture.
If this is the case, then reducing the whole life to paid-up term may not give you the coverage you need for as long as you need it. You might want to consider purchasing a stand-alone term policy with the face amount and guarantee period that will get the job done.
If you are concerned about qualifying for a good rate due to a medical or lifestyle issue, then make sure you are dealing with a broker who can place that type of case. You still may be able to get a very reasonable price.