Policy Types

Renewable or Convertible Term Life Insurance: Which Should You Choose?

Considered one of the most common types of life insurance, you might be able to extend coverage beyond the original life of the policy. Learn how these options can benefit you.

Choosing the Best Term Life Insurance For You

When it comes to the many different types of life insurance, term may be more understood because of its simplified structure. Just like any other life insurance policy, it is designed to pay a death benefit to your beneficiaries when you die. With a term policy, you select the length of the term (typically from five to 30 years) and the amount of the death benefit that you need. If you die within the term specified in your policy*, the benefit will be paid to the person or people you have named as your beneficiaries.

Although term life insurance can lack many of the benefits associated with permanent* life insurance, it is sometimes possible to include two important types of policy choices - renewable and convertible. In this article, we'll look at both types of insurance policies so that you can make the best choice for you and your loved ones.

Renewable term life insurance

Once your term life insurance policy has expired and you are still living, your policy will typically come to an end. However, if you have a renewable term life insurance policy, you (the policyholder) have the option of renewing your policy for an additional number of years. Just how long you can extend your term life insurance policy depends on your individual contract. While this type of policy may give you the option of renewal without having to undergo a medical exam, your new rate will be based on your current age and health.

For example, if you bought a 10-year, $25,000 renewable term life policy when you were age 30 and are now age 40, at the end of your policy's term you may have the option of renewing your policy for another 10 years, however, your new premiums will be based on your current age of 40. Moreover, if your health has changed or if you have since become a smoker, your rates will also reflect these changes in your health, resulting in higher premiums.

The benefits of selecting a renewable term life insurance policy could include being able to get the coverage you need now at an affordable price, and having the option of extending your coverage in the future for one or more terms. Just keep in mind that as you become older and if your health changes, you could be looking at paying much higher premiums. Most renewal provisions place a limit on the number of times that you may renew and the age at which you may renew.

Convertible term life insurance

This type of policy can allow you, the policyholder, the option of converting your term policy into a permanent policy in the future without undergoing a medical exam or having to answer any health questions. However, it's important to note that some insurance companies may put an age limit on when you can convert your policy. Keep in mind that your new premium at the time of conversion will typically be based on your current age and will reflect the higher expense associated with cash value life insurance.

For example, if you purchased a $25,000 term life policy at age 30 and convert it into a $25,000 whole life policy ten years later, your new premium will be that of a cash value policy for a 40 year old individual.

The benefit of selecting a convertible term life policy is having the option of locking into a permanent policy at a later date. This can be an important factor if you think your health may change over the years, affecting your chances of being able to buy more life insurance coverage. It's important to note that, depending on the policy, conversions may not be allowed after a certain period of time or after a specified age has been attained.

Before you decide on term life insurance, there are other product types that may be worthy of consideration. For example a Protective Life Custom Choice Universal Life policy is usually less expensive than other universal and whole life insurance products. It can provide a level premium and coverage amount for a specified period of time, and premiums won't suddenly increase after the initial coverage period ends.

CCUL Bar Chart

If that is important to you, it may be beneficial to learn more about the Protective Custom Choice UL product. If you are unsure as to what type of policy may be best for you, speak with a life insurance company representative or visit the Protective Learning Center.

The monthly premium example is for a Protective Custom Choice Universal Life Insurance policy with a $100,000 death benefit for a 30-year-old male insured, Select Preferred underwriting class, with a 10-year guaranteed initial level benefit period. Premiums and face amounts listed are for the initial level benefit period. The level premium period may be extended beyond the initial level benefit period, however the face amount will begin to decrease annually until it reaches $10,000, at which point premiums will begin to increase. Different planned premium frequencies will require different total annual premium amounts. More frequent planned premiums will typically require higher premium payments to be made. Actual results will vary based on a variety of factors including age, gender, health and other underwriting factors.

Protective Custom Choice UL (UL-22) is a universal life insurance policy issued by Protective Life Insurance Company, Birmingham, Ala. Policy form numbers, product features and availability may vary by state. Consult policies for benefits, riders, limitations and exclusions. Subject to underwriting. Up to a two-year contestable and suicide period. Benefits adjusted for misstatements of age or sex. In Montana, unisex rates apply. All payments and all guarantees are subject to the claims-paying ability of Protective Life Insurance Company. The tax treatment of life insurance is subject to change. Neither Protective Life nor its representatives offer legal or tax advice. Please consult with your legal or tax adviser regarding your individual situation before making any tax-related decisions.

1.This chart compares the Protective universal life product to competitors' term products. Rates are effective as of March 27, 2015, vary by carrier and are subject to change without notice.

*As long as required premium payments are timely made.

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Term Life Insurance

Term life insurance may be an affordable way to get the coverage you and your family need. Although considered a temporary type of life insurance policy, some term life policies offer options for policy holders to extend their coverage beyond the contract's term with renewable and convertible term life policy options. This article looks at what these types of term life policies are and how they may benefit you as well as other types of insurance that have similar benefits of term. For more information, visit the Protective Life Learning Center.

All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.