Life throws curveballs, and due to the same, your insurance needs can change mid-way. When you were fresh out of college, you may have chosen a simple term life policy. However, with a family and a growing nest egg, you may be wondering whether there is a way to shift and reap the benefits of a whole life or endowment plan. Can you change your existing term plan into a completely different life insurance policy? In this article, we will be exploring the same and consider alternatives as well.
Is it really possible to change your existing plan?
While the thought of easily turning your term plan into a whole life insurance may sound appealing, it is typically not possible. Term life insurance is intended to provide coverage for a limited time at a lower price. This affordability comes with a trade-off with the fact that term insurance comes without maturity benefit. Whole life and endowment life insurance plans, on the other hand, include both a death benefit and a cash value component that builds up over time. Converting a term plan into different types of life insurance entails starting from scratch with a new policy.
If you want to receive your premiums at the end of the policy, you can cancel or surrender your current pure-term plan and buy a new 100% refund of the premium plan. However, it is preferable to keep the prior pure-term plan as additional protection and then get a new policy.
What are my other other options?
Purchase a new policy: You can always choose a new life insurance plans with a higher coverage that better fits your present position. This allows you to select features such as a cash value component and customize the coverage amount to your specific needs. However, keep in mind that premiums for other types of life insurance may be higher based on your age and health.
Term Conversion Option (Limited Availability): Some term life insurance plans, but not all, have a conversion feature that allows you to convert your policy to a whole life or endowment plan within a certain timeframe (typically during the initial policy years). Check your policy documentation or contact your insurer to find out if this option is applicable to your plan.
Term and Investment Strategy: This strategy involves keeping your current term life policy for its death benefit while investing the money you would have spent on a more expensive policy with a cash value component. This gives you more flexibility in your investing choices and potentially higher profits.
Can I get two term insurance plans at the same time?
Yes, you can purchase multiple term insurance policies at the same time to increase the coverage of your plans as you progress through life. Your eligibility for the maximum cover may have been smaller when you purchased your initial term insurance policy, but as you age, your needs and your income may increase which can make you eligible for other types of life insurance. Thus, you can purchase another term plan to meet your changing needs based on the maximum coverage you are eligible for. There are various benefits to purchasing two-term insurance policies in India. Some of them are:
Higher Chances of Claim Approval: Purchasing term insurance plans from two or more different insurers might raise the likelihood of claim approval. In this way, if the claim from one one-term plan is denied, your family will still receive the death benefit from the second-term plan. Before purchasing term life insurance, always examine the CSR values of different insurers and select the most appropriate plan from the insurer with the highest CSR value. This is because an insurance company with a high claim settlement ratio has a better probability of resolving your family’s case.
Larger Life Coverage: Two-term insurance policies provide a substantial life insurance benefit in the event of the policyholder’s death. The payouts from both term plans can assist your family pay monthly bills, child care costs, rent, and other financial commitments such as loans and debts.
New and updated features: Term insurance policies are constantly upgrading their policy benefits and terms. For example, if you purchased a pure-term plan at the age of 20 and wanted to upgrade to a 100% refund of premium plans at the age of 30, you could do so while remaining protected under the old plan. This allows you to keep your previous pure-term plan operational while purchasing a new no-cost term plan and leaving it as needed.
Changes in Life Stages: As your life stages advance, your coverage requirements may vary as well. If you bought a term plan when you had no financial dependents and then married and had children a few years later, the sum assured from your initial policy may not be enough to support your family’s financial demands. Thus, a new term plan can assist your family in meeting their financial obligations in your absence, like as paying off existing loans or funding your child’s higher education.
So we are saying,
While converting from term life to a different type of life insurance plans is often not viable, you can still tailor your insurance strategy to your changing needs. Evaluate your options based on your budget, risk tolerance, and long-term goals. Consulting a financial advisor can assist you in developing a personalized plan that ensures you have adequate coverage at each stage of your life. Remember, the goal is to have a safety net in place, and with a little knowledge about the different types of life insurance available, you can discover a solution that suits you.
