What does "term conversion" mean in life insurance?

Term conversion in life insurance refers to the process allowing a policyholder to convert a term life insurance policy into a permanent life insurance policy, such as whole or universal life, without having to provide evidence of insurability. This means that when the term policy expires or upon reaching a specific age, the insured person can switch to a permanent product while avoiding the need for new medical underwriting or assessments. This feature is particularly advantageous for individuals whose health may have changed, as it ensures they do not face any rejections or higher premiums based on their current health status.

The ability to convert a term policy is often included in the terms of the initial contract, providing peace of mind for policyholders who are planning for long-term coverage. It allows for continuity of insurance protection even if the insured individual's health deteriorates over time. This emphasizes the importance of having flexible options within life insurance policies, particularly for those who might continue needing coverage beyond the initial term period.

Understanding term conversion is crucial for life insurance producers because it highlights a significant benefit that can enhance a policy's value and provide clients with long-term security.