Author Topic: Permanent Life insurance conversion  (Read 1919 times)

rayt168

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Permanent Life insurance conversion
« on: April 20, 2016, 12:35:26 PM »
Hi, at the present time, I have term life insurance with USAA.  I noticed this when I was reviewing my policy online.  I never gave it much thought.  My policy shows that at the end of this year, I will lose the right to convert the term life policy to permanent life insurance without proving insurability.

1) The best value for life insurance is term life.  Although I have NOT checked, the insurance premiums would go up significantly. 
2) If, for some reason, I chose permanent life insurance over term,  it would take many many years for any cash value to build up.
3) There really isn't a reason to convert over to permanent life insurance since the investment portion and life insurance portion should be kept separate.

Just wanted to be sure that my assumptions were valid.  Please feel free to add your 2 cents.

Thanks,

Ray


JoJo

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Re: Permanent Life insurance conversion
« Reply #1 on: April 20, 2016, 02:21:15 PM »
Questions to answer:
* Do you want more years of insurance?  how many?
* How many years are left on the level premium period of the existing term?
* How healthy are you?  As healthy as you were when you applied for the existing term (weight, blood pressure, cholesterol, etc).

rayt168

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Re: Permanent Life insurance conversion
« Reply #2 on: April 21, 2016, 04:19:48 AM »
* I am currently 52 yo.  I would like to continue to carry life insurance for at least 5 more years (regardless of the conversion).
* I have two term policies with USAA.  The 1st one has 3 more years to go.
* I am fairly healthy although I do have some minor health issues.

Thank you so much for replying.

chasesfish

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Re: Permanent Life insurance conversion
« Reply #3 on: April 21, 2016, 05:09:00 AM »
This is really a financial decision to convert.  You need to ask them for data/estimates over the next five years that show what your cash value will be after conversion.  Then look at the following:

Premium Paid
less Cash Value Gain
Equals:  Cost of Insurance + Commissions

There are actually really nice tax treatments inside Whole/Permanent life, but I've always found the policies to be too expensive relative to term plus investing the difference.  The higher your net worth, the more sense that permanent life makes

JoJo

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Re: Permanent Life insurance conversion
« Reply #4 on: April 21, 2016, 12:52:03 PM »
If  you only want a few more years of insurance, I wouldn't convert.  At your age you could get another term policy.  If it's smaller amounts (< 150 or 250K) you can get them without alot of underwriting.  Above that amount you would need to fully apply again and likely have blood tests.  But both of these would likely be alot cheaper than the permanent insurance.