- Learn about Convertible Insurance
- Features of Convertible Insurance
- Convertible VS Renewable
Understand Convertible Term Insurance
Over time, term insurance plans have developed to provide extra perks with high life cover in exchange for affordable premiums. Nowadays, people opt for convertible term insurance plans instead of basic term plans because policyholders are allowed to turn their regular term plan into a permanent life insurance policy. To understand Convertible term insurance plans, take a look at the example below.
- Let's suppose you wish to turn your basic term plan into ULIP or a permanent life insurance plan after three years of buying the policy.
- In that case, if you're holding convertible term insurance, then you're eligible to do so without any hassle.
What Is a Convertible Term Plan?
A convertible plan is a type of life insurance that allows policyholders to switch a basic term plan into a whole life or a life-long term insurance policy. Some of you may be aware that term plans only provide cover for a specified period.
- Let's say Bhanu purchases a policy at the age of 30 with a policy tenure of 40 years.
- However, the plan will expire at the age of 70.
- But given the life expectancy rate, Bhanu may live a longer and happier life till the 80s.
- Since the plan expires at the age of 70, Banu might end up without life cover for the last few years of his life.
- In another case, if Bhanu bought a convertible term plan, then he can switch from a term plan to a whole life or ULIP plan.
Please note that the T&Cs to convert term plans may vary from insurer to insurer. However, one of the best aspects of convertible insurance is that the insured person doesn't have to do the medical test again to convert the term plans.
How Convertible Insurance Works
When a policyholder decides to switch their convertible insurance, the permanent policy will have the same value as the term policy. Even before conversion, the convertible insurance will be more expensive than a term insurance policy for the same amount of life cover. There is a built-in cost for the option of being eligible to make the conversion without a medical test. However, the best aspect of holding a convertible policy is that the policyholder doesn't have to do paperwork again to convert the policy. While switching convertible term insurance into whole life insurance, you won't have to pay a fee, but you can expect increased premiums after conversion.
What is the Conversion Deadline for Convertible Insurance
A convertible insurance policy allows an insured person to switch the plan during a pre-decided number of years. You can decide when to opt for conversion between the pre-decided window. If you forget to convert your policy to other insurance under this window, you'll forfeit the right to alter your plan. However, the rules and conditions may vary from insurer to insurer, so before making any decision, check your policy to see the deadline.
Key Features of Convertible Term Insurance
Convertible term insurance is just a regular term plan with a feature of conversion. When you buy a convertible term plan, you can enjoy some key features of the plan.
- Steady Premiums A convertible term plan comes with a steady premium. In the future, even if you convert your policy and opt for one with extra benefits, you do not have to worry about paying additional premiums.
- Maturity Benefits When you switch your convertible term insurance to a whole life insurance policy, you can avail yourself of many maturity benefits. It includes endowment plans to help you grow your money to fulfill future goals and provide additional maturity benefits. Therefore, if you outlive the policy term, you can avail several maturity benefits.
- No Risk Assessment While buying a term plan, the insurer will do some risk assessment. It helps the insurer to understand how much life cover is adequate for you. However, the procedure is the same for basic and convertible term plans. But when you switch the term plan, you'll not have to go through any risk assessment round.
- Better Tax Benefits In a basic term plan, you can avail yourself of a tax exemption of up to ₹1.5 lakhs under Section 80 of The Income Tax Act 1961 for the premiums paid towards your term insurance plan. If you turn the convertible insurance into an endowment plan, the returns you'll receive are also tax-free!
Convertible VS Renewable Term Insurance
A convertible term life insurance plan allows policyholders to switch their plans into basic life insurance policies or endowment plans in the future. On the other hand, renewable-term insurance allows the policyholder to renew the policy term and extend their life cover. However, these plans do provide extra sum assured, but they do not typically offer any maturity benefit.
Conclusion
Convertible insurance comes with a key feature to modify your future coverage without worrying about possible changes to your health. It may cost more than a basic term plan, but it's worth it because it also covers the cost of switching to a permanent policy. Talk to our insurance experts to briefly understand convertible insurance costs and flexibility before making any decisions.
Convertible Term Insurance Plan : FAQs
1. What is a convertible term protection policy?
Convertible insurance is term insurance with a conversion option that allows policyholders to switch a basic term plan into a life-long term insurance policy.
2. What is the benefit of convertible insurance?
One of the benefits of convertible insurance is that the insured person can change their short-term life cover to a longer one without going through the medical test.
3. Is it expensive to convert a term to whole life?
While switching convertible term insurance into whole life insurance, you do not have to pay a fee, but you can expect increased premiums after conversion.
4. What is the maturity age of convertible whole life insurance?
The maturity age of convertible whole life insurance is 50, 55, or 58 years after conversion.
5. What is a 10-year renewable and convertible term life insurance?
Under 10-year renewable, you can renew your term policy after ten years before it expires. Under a convertible term policy, you have the option to convert the policy to whole life insurance that will not expire until you keep paying premiums on time.
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Written By: Sahil Singh Kathait
A boy-in-squares bagging escapades of switching streets in groove & sensing musical airy-notes from 6 1". Under wayed nyctophile sketching the walls of life from the panorama of anime.
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