My colleague, who grew up in the insurance industry, was a true believer in the value of life insurance. Her husband really wasn’t. John was much older than his wife and was confident that her successful career and investments would take care of her if anything ever happened to him. Don’t misjudge, he loved his family, but he just didn’t see the need for life insurance.
About 15 years ago, after many years of coaxing, he finally agreed to a moderate amount of life insurance, enough to leave a little to each of his children and cover funeral expenses. At his older age, and as a smoker, term insurance was all that he would consider. He didn’t see the value of paying higher premiums for permanent insurance.
Although the term insurance did provide some peace of mind, she was confident she could talk him into considering additional coverage down the road and she was concerned that term insurance may not have been the best option for them. She was sure he would see the light. Since term insurance is life insurance where the premium stays the same for a stated period of time–5, 10, 20 years–the conversion option allows to you convert this temporary coverage, before the premiums increase significantly, to permanent coverage that will last a lifetime. As long as the premiums continue to be paid.
John did in fact see the light, but when he did, he no longer qualified for additional coverage. He hadn’t planned on having a stroke, he hadn’t planned on getting cancer a few years later, he hadn’t planned on going through two major surgeries, he didn’t expect to be told he was terminal.
It’s interesting how one’s perspective changes when they hear that kind of news. He wished he had purchased a lot more life insurance. He wished he could leave his family a true legacy. He wished he didn’t feel guilty putting all the burden on his wife to take care for her own financial future. But that is how it was–wishes that would not come true.
But was it too late? John’s wife knew the coverage he had was for a “term” and was afraid the term would run out and they’d have no coverage. They looked into the term conversion option on her husband’s policy. Fortunately, it wasn’t too late and they were able to convert the policy to permanent life insurance coverage that gave them one less thing to worry about at an already stressful time in their lives. They would at least have some insurance benefit when the time came.
John passed away one year later. His policy afforded him what he had originally hoped for: his final expenses were paid for and his wife was able to give each of his children a small remembrance.
She was left with much more. She was left knowing how important it is to let people know that if they own term insurance, or are considering buying term insurance, that they understand their term conversion option and the impact that it could have on their financial future.
It is important to know that not all term insurance policies offer this conversion option. If you have term insurance, you will want to look closely at those term conversion privileges to see if there are any restrictions as to the permanent policy you can convert to and whether the permanent life insurance policy will meet your needs.