What is a convertible insurance policy?

By Katie Adams AAA
A:

A convertible insurance policy is a term usually related to life insurance. To understand a convertible policy, you must first understand term and universal policies.

"Term" life insurance is a policy that provides the insured person coverage for a certain period of time. On the other hand, a "whole" or "universal" policy is considered permanent, providing coverage for the entire life of the insured.

Now, a "convertible term" policy allows the insured to covert a term policy to a permanent policy at a later date. As long as the conditions of the policy have been maintained and payments made on time, the insured person is not required to undergo any new or additional screening at the time the policy is converted, regardless of his/her medical condition. This type of policy provides the benefit of obtaining less expensive term life insurance now while maintaining the option to convert to a permanent policy at a later date as insurance needs and financial resources change.

For more on this read, Buying Life Insurance: Term vs. Permanent.

This question was answered by Katie Adams.

RELATED FAQS

  1. Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ...
  2. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ...
  3. How did the ABX index behave during the 2008 subprime mortgage crisis?

    Read about the disastrous performance of the various ABX indexes in the subprime mortgage crisis of 2008 during the middle ...
  4. What are the tax implications of a life insurance policy loan?

    Learn the instances in which you are required to pay taxes on a life insurance policy loan, so you can avoid making a costly ...
RELATED TERMS
  1. Medical Identity Theft

    Stealing another person’s health insurance information so that ...
  2. Noncancellable Insurance Policy

    A life or disability insurance policy that an insurance company ...
  3. Member Month

    The number of individuals participating in an insurance plan ...
  4. Pre-Existing Condition Exclusion Period

    A health insurance benefit provision that places limits on benefits ...
  5. Policy Or Sales Illustration

    An educational tool that shows a prospective or new insurance ...
  6. Point-of-Service Plan (POS)

    A type of managed-care health insurance plan that provides different ...

You May Also Like

Related Articles
  1. Thanks to the Affordable Care Act, you can no longer be denied health insurance for having a pre-existing or chronic medical condition.
    Insurance

    Choosing A Health Plan For Your Chronic ...

  2. Four key factors to check out before you just sign up for dental insurance. The coverage could be really worth it – or not.
    Insurance

    Does That Dental Insurance Have Cavities?

  3. Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio?
    Trading Strategies

    How Good An Investment Is Life Insurance?

  4. Insurance

    4 Steps to Finding the Right Health ...

  5. Insurance

    Tips for Finding Affordable Health Insurance

Trading Center