Insurance Read Time: 5 min

Tips to convert term life insurance to whole life insurance

There are many types of life insurance policies that can help protect you and your family. Term life insurance can be an attractive choice for younger individuals who are looking for affordable coverage, especially if they’re not ready to commit to permanent life insurance, such as whole life. Even better? While a term life policy provides coverage for a defined length of time, there are policies that can be converted to permanent life insurance for part or all of the coverage period down the line. Permanent life insurance also has some key living benefits on its own for those who may be want to take advantage of those benefits now.

Here are a few key considerations to help you determine whether a term-to-perm conversion option is a good starting point for obtaining protection for your loved ones.

A closer look: term life insurance

These type of policies are often more affordable than permanent life insurance policies because of their lower premiums and flexibility, including coverage that lasts for a specified amount of time, such as a 10-, 20-, or 30-year term. On some term life products, unique riders1 may also be available, such as the ability to donate an extra 1 percent of the death benefit — over and above the amount paid to the designated beneficiaries — to any qualified 501(c) (3) charity of the policy owner’s choosing.

A closer look: permanent life insurance

Permanent life insurance, like whole life, can be an option for those looking for life insurance coverage with additional unique benefits beyond traditional death benefit protection. A whole life insurance policy doesn’t expire as long as you make your premium payments on time. Permanent insurance policies typically combine a death benefit with a unique living benefit – its cash value.3, 4 This benefit can be used however the policyowner needs or wants. Unlike some other savings vehicles, such as certain retirement plans, there are no restrictions on what you can use the cash value for, or when you use it. This can be a great way to save for larger goals like a home purchase or college savings. Additionally, unlike some of those savings vehicles, cash value is not invested in the market and so it is insulated from the ups and downs of market events. When choosing permanent life insurance, you typically have a choice between whole life and universal life.5, 6, 7

The primary purpose of life insurance is to ensure beneficiaries receive an income tax-free death benefit after your passing. Having whole life insurance does this, but also may make it possible to fund opportunities or unexpected expenses without tapping into an existing savings account.While term life pays beneficiaries after you pass, that coverage term could end first. That’s where the benefits of converting to a permanent life insurance policy come into play.

Benefits of a permanent life insurance policy include providing cash value9 to potentially help fund:

  • Your retirement
  • Education for you or a dependent
  • College savings
  • A new home or improvements on your home
  • A gift to a family member
  • Donations to charity

One key note: You may have heard others mention how expensive permanent life insurance policies are, or that they only pay funds after your passing.10 Yes, permanent life insurance policies indeed cost more than a term life insurance policy, but that is not the entire picture. It’s key to remember that a whole life policy will protect you for life, not just a set amount of years, and is providing additional benefits during your lifetime.

When it comes to costs, your income should be one of the many factors you take into consideration when shopping for a life insurance policy. That’s why many people look at the types of policies that are available and choose one that fits their budget. If that means choosing a term life insurance policy first and converting it later, then you can still reap the benefits of that conversion while ensuring protection today.

Making the conversion: benefits for now and later

Permanent insurance policies offer benefits that term policies don’t, so many find that it’s helpful to use them together.11 Converting from term to permanent life insurance means you’re converting all or some of your term life insurance into permanent policies, like whole life or universal life.

While most policies include the option to convert, you may be able to add the option as a rider if it isn’t included in the policy. So, even if you decide to buy term life insurance now, you may have the option to convert it to a permanent life insurance policy later12. As your income increases and your protection needs change, your life insurance strategy can change with you by potentially converting to a whole life policy later.

It can be beneficial to work with a financial professional who can help you plan for a more protected future.


1 Riders may incur an additional cost or premium. Riders may not be available in all states.

2 The Charitable Benefit rider is available on Guardian Level Term policies. Up to a maximum of $100,000. Subject to state availability. Guardian Level Term is issued by The Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware corporation whose principal place of business is 10 Hudson Yards, New York, NY 10001. 1 888 GUARDIAN (1 888 482 7342). Policy form numbers: GLT 10, 15, 20, 30: 20-GLT Charitable Benefit Rider: 20-CBR GIAC

3 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

4 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.


6 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company’s board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.

7 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guaranteed requirements are not met, the policy will most likely lapse.

8 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gains in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59½, any taxable withdrawal may also be subject to a 10% federal tax penalty.





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