Which of These Types of Life Insurance Allows the Policyowner to Convert to Permanent

If you're looking for a type of life insurance that lets you convert to permanent coverage, you'll want to consider term life insurance with a conversion option. Some term life policies allow you to convert to a permanent policy, such as whole life or universal life insurance.

This conversion option is usually available for a limited time, often during the first few years of the policy. The cost of the permanent policy will be based on your age at the time of conversion, so it's essential to factor that into your decision.

Term life insurance with a conversion option can provide flexibility, especially if you're not sure how long you'll need life insurance. This can be a good option for young families or those with changing financial situations.

If you're looking for a life insurance policy that allows you to make adjustments to your premium payments, Universal Life is the way to go.

With a Universal Life policy, you can increase, decrease, or even skip premium payments within certain limitations, as long as the policy's accumulated value remains sufficient to keep the policy in force.

This flexibility is one of the key benefits of Universal Life, making it a great option for individuals who need the guarantees provided by a Whole Life policy but want the possibility of earning higher rates of interest on their policy values.

Some Universal Life policies may also allow you to raise or lower the death benefit more easily than with a Traditional Whole Life policy.

Here are some key features of Universal Life policies:

Variable Life policies, on the other hand, allow you to choose how to invest the policy's accumulated value, but this also means you bear the risk of the investments performing poorly.

Traditional Whole Life policies, also known as ordinary life or straight life, cover the insured for life as long as premiums are paid, with the premium remaining the same throughout the life of the insured.

There are three major types of term life insurance: Level, Increasing, and Decreasing.

The death benefit stays the same throughout the policy term with Level term life insurance, and premiums typically remain constant.

Increasing term life insurance has a death benefit that increases by specific amounts and at intervals as specified in the policy, with premiums normally increasing along with the benefit.

Decreasing term life insurance has a death benefit that decreases periodically as specified by the policy, with premiums typically remaining constant throughout the policy term.

Annual Renewable Term life insurance is a type of term life insurance that allows you to lock in the insurance premium rate for one year at a time. This means your premium will increase every year as you get older.

The initial premium for the first year can be appealing, but it's essential to be aware that premiums will increase annually. In fact, a sample chart shows that ART premiums can increase significantly as you age, with a 30-year-old male paying $133 in the first year, but $238 by the time he's 39.

ART insurance policies renew automatically each year, without requiring evidence of insurability, as long as you pay the premium. However, there is a maximum age limit for renewal, which varies by state. For example, in New York, the ART age renewal limit is 80.

ART life insurance may be suitable for individuals who need to cover short-term debts or are in-between jobs and anticipate buying life insurance through a future employer. However, it's worth noting that if you renew the policy for many years, you may end up paying more in total premiums compared to having bought a level-term life insurance policy.

Here's a comparison of ART and level-term life insurance premium rates for a 30-year-old male:

Level-term life insurance and decreasing term life insurance are two types of term life insurance that have distinct characteristics. Level-term life insurance lasts for 10 to 40 years and has a guaranteed death benefit, while decreasing term life insurance has a shorter duration of 5 to 30 years and a decreasing death benefit.

A key difference between the two is the duration of coverage. Level-term life insurance provides coverage for a longer period, making it suitable for individuals who need coverage for several years and for multiple debts or reasons. Decreasing term life insurance, on the other hand, is more suitable for covering one large debt or loan.

Here's a comparison of the two types of term life insurance in a table:

As an alternative to decreasing term life insurance, an individual can buy multiple level-term life insurance policies of varying lengths and coverage amounts, creating a "laddered" insurance portfolio that expires as their obligations decrease.

Universal life insurance offers a range of options to suit individual needs, but not all types allow the policyowner to adjust their premiums and death benefits as their needs change.

One type of universal life insurance is the traditional universal life policy, which allows policyowners to increase, decrease, or skip premium payments altogether, as long as the policy's accumulated value remains sufficient to keep the policy in force.

Indexed universal life insurance is another variation that offers the potential for higher interest rates based on equity market performance, but required premiums may increase as the insured gets older, and an equity market downturn may impact cash value growth.

Variable universal life insurance combines the premium flexibility of universal life insurance with a choice of investment options, but the policyowner assumes the investment risk and may experience losses during times of poor market performance.

Here are the key characteristics of each type of universal life insurance:

Ultimately, the choice of universal life insurance depends on individual financial goals, risk tolerance, and desired level of flexibility.

Adjustable life insurance is a type of permanent life insurance that can last your entire life, provided you keep paying the premiums. It differs from other products like whole life because you have a lot more flexibility to change the policy terms after signing up.

You can change your premium payments, which means you can pay more into adjustable life during years when you're earning a lot and decrease the premium while on a restricted budget. This flexibility is attractive if you want the protection and cash value benefits of permanent life insurance yet need or want some flexibility with policy features.

One of the benefits of adjustable life insurance is that it earns cash value, which is another source of savings while you're alive. The cash value grows based on market interest rates, but the return can go up and down each year.

Here are some key features of adjustable life insurance:

Changing the death benefit may require additional underwriting or possibly an updated medical exam. If you don't pay enough into your adjustable life insurance to cover the insurance costs, your future premiums will go up.

If you're looking for types of life insurance that allow the policyowner to borrow against the policy's cash value, you might want to consider a Universal Life Insurance policy. This type of policy allows the policyowner to use the cash value to take out loans, which can be useful in times of financial need.

Whole Life Insurance, on the other hand, typically doesn't allow policyowners to borrow against the policy's cash value, but it does offer a guaranteed death benefit and a guaranteed cash value. The cash value in a Whole Life Insurance policy grows over time and can be borrowed against, but it's not as flexible as a Universal Life Insurance policy.

Variable Life Insurance policies can also be used to borrow against the policy's cash value, but they often come with investment risks and fees. The cash value in a Variable Life Insurance policy is invested in various assets, such as stocks or mutual funds, which can fluctuate in value.

Indexed Universal Life Insurance policies often allow policyowners to borrow against the policy's cash value, but they also come with fees and investment risks. The cash value in an Indexed Universal Life Insurance policy grows based on the performance of a specific stock market index, such as the S&P 500.

Adjustable life insurance offers flexibility in adjusting the cash value, premiums, and death benefit, making it a great option for those with shifting life events.

It's often cheaper than whole life insurance for the same death benefit, and the premiums or death benefits remain the same over time, providing budget stability.

Adjustable life insurance includes a savings component, the cash value account, which earns interest, although the gains are typically modest.

You can borrow from the cash value account or use it to pay your premiums, giving you more control over your insurance coverage.

Here's a quick comparison of the two types of life insurance:

Level-term life insurance is usually the cheapest form of life insurance for most individuals, providing an affordable option for those looking for a straightforward policy.