A simple guide for buying a Convertible term insurance plan – What should you know?
What is convertible term insurance?
Many of us might have this question. Of course, we would have heard about some standard terms like pure life insurance, term plan, and ULIPs insurance plans. But what is convertible term insurance? Is this being a new concept to know about?
Like all of us, Sundar also had this doubt. So, with the same eagerness to know about the term plan, let’s also join him and check out how effective the convertible term plan will be for us.
Convertible term plan:
This term plan provides the policyholder coverage for a certain term period. The convertible plan will allow the insured to convert his term plan to a permanent policy in the future as he desires.
This policy will start as a regular-term life plan. This is, however, a temporary insurance life plan coverage, which is set with an expiration date for a period of 10 years, 15, 20, or up to 30 years according to your choice or the insurance company’s norms. If the policyholder demises during this term period, the death benefits will be paid to the beneficiaries. Whereas, if the coverage period is over, the coverage will end with no benefit if you outlive the term period. If you are looking for a convertible plan, then the term insurance buying guide with the following information could help you.
Benefits of Convertible Term plan:
- This type of plan helps to keep the option open anytime the policyholder might seek a conversion.
- Although a term life plan might appear perfect for now, you might want to switch to permanent life plan coverage over the years in the future. In that case, this will be a secured choice.
- This term plan will help to extend the coverage, which is likely to expire.
- Until the policy is alive and active, you can convert the term plan at any time, even at the last few days before it expires.
- Since you are trying to switch to permanent coverage, your premium might also increase along with when you try to convert the policy.
- In addition, if you have a health discount for your policy, this discount will continue even after your conversion to a permanent one.
When is the right time to convert your policy?
- If you have taken a term plan for a short period, but you feel that you might not seek more coverage in the future with an extended period, then this is the time for you to convert.
- If you are looking to buy your first life insurance plan, but at the same time you want permanent coverage, but your affordability is a question, then you can consider buying a convertible term plan.
- If you have health problems but are worried about getting better coverage, then this policy will be helpful for you to buy.
- If you want to continue your coverage, but the term plan is likely to end, then it is time to think of a convertible plan.
- If you think you might want coverage to extend until your retirement and even after your retirement, then it’s time to consider buying a convertible plan
With the above-said points, remember before you take a convertible insurance plan, the conversion can happen only as long as policy conditions are maintained, and the premiums are paid on time. Similarly, there is also no need for any additional or new screening to be carried on to update your policy to permanent coverage.
Key features of Convertible plan
- This is an option that helps to convert a plan to an endowment assurance plan.
- Some convertible term plans might have an inbuilt conversion option, whereas some may seek an add-on feature, which can be included if required with an additional premium.
- Until the policyholder requests the insurance company; the insurance plan will continue as a conversion plan.
- The premium for the convertible plan is computed based on the sum assured, age, term period of the policy, and premium paid
- When a plan is converted to an endowment assurance plan, then the plan also qualifies for maturity benefit and death benefit
- The convertible term plan has riders including the accidental death benefit, disability benefit rider, terminal illness rider, critical rider, waiver of premium rider, and others
- Convertible term plan also has tax benefits to offer. Therefore, the premium you pay for the convertible plan is still eligible to be claimed under income tax Section 80C and Section 10(10D).
Who is eligible to buy a Convertible term plan?
- If you are 45 years and over, but looking for a permanent term plan, then this convertible plan is the best option for you
- Anyone who is not interested in going for a medical examination but still wants a permanent cover can consider buying a convertible plan
- Anyone of age 65 or over can also consider this convertible plan, mainly when your term plan is in the expiring stage
- This convertible plan is beneficial to a family, in which a child is in need of permanent care into adulthood, when a family member has dramatic health issues, and when you look for a considerable tax-advantage
The conversion of your term plan is free. However, the premium you are going to pay will undoubtedly jump, which you need to consider. Undeniably, this convertible plan will give life-long insurance protection to you and your family members. Try to get guidance from an insurance expert or online support from iiflinsurance.com before buying convertible term insurance.