A conversion credit offers policy holders the option convert a term life insurance policy to a whole life policy – turning temporary coverage – into permanent coverage. Instead of getting an entirely new policy to take advantage of the cash value of whole life insurance, many policyholders convert their term policy to whole. Doing so, however, will significantly drive up monthly premiums, which is why many insurance companies offer a conversion credit that typically reduces the premiums for the first year of the newly converted policy. That allows you to ease into slightly higher premiums before the full increase takes effect.
Differences Between Whole and Term Life Insurance Policies
A whole, or universal, life insurance policy is active for the policy holder’s entire life—as opposed to a set number of years for term policyholders. It also builds cash value that owners can cash out if needed. Many people opt for a term policy, especially if they sign up when they’re younger, because of its more affordable premiums; however, as you age and your income level ideally rises, it may benefit you to consider a conversation credit and moving to a whole policy.
However, for those who are already contending with a medical crisis, any type of additional expense may be a challenge, which is why a Life Credit Living Benefit Loan may be a more sensible and affordable option.
Alternatives to a Cashing Out Your Life Insurance Policy
Life Credit works with clients who have all types of life insurance but, for those who are exploring other options of drawing on their policy for financial support, they’ll likely want to have a whole life policy or consider using a term policy conversion credit.
If you’re exploring using your life insurance to help support someone facing a terminal illness, you may have encountered the question, it’s important to first understand how life insurance can be used to generate financial assistance for cancer patients and others facing serious medical conditions. To contend with treatments, medications and round-the-clock care, some patients look to cash out all or part of their life insurance, but such moves can often mean policyholders leave little to their beneficiaries. Another option is a Life Credit Living Benefit Loan, which allows you to borrow against your death benefit—so you can deal with your pressing financial needs while still retaining the benefit you may have paid into for decades.