Mumbai (Maharashtra) [India], December 27: A convertible plan which allows the policyholder to change the term plan into a whole life insurance plan. There is no requirement to have an additional medical test done during the conversion of the plan. A Convertible term policy is a simple & affordable term plan, which allows you to get the policy converted into another endowment insurance plan.
Though the amount of premium is higher premiums than term plan, it still provides multiple benefits, which includes level premiums, life-long coverage, & tax-free cash value accumulation.It's not a mandatory benefit, i.e. totally optional one.
Features & Benefits of Convertible Term Insurance
Provided are the features & benefits of a Convertible Term Insurance Plan:
- Conversion
Policyholders can get their policy converted into a whole life policy at any time during the policy tenure, well-aligning to the terms & conditions of the insurance company.
- On-Dem & Conversion
This option can be availed when the policyholder initiates an official request to the insurance company.
- Premium
The premium amount for the term plans with conversion options is generally higher as it offers maturity benefits. The premium amount is on the lower side as compared to regular endowment plans. The premium amount calculated with the help of term insurance calculator at the plan's start remains the same throughout the tenure, even if the conversion is opted for.
- Benefits Payable
In the case of a pure-term plan, the death benefits are only payable to the insured. But, in case of conversion, get maturity benefits along with the death benefits.
- Underwriting
The risk assessment of the policyholder is called underwriting, which is performed at the inception of the policy. But, at the time of conversion, no new underwriting is required.
- Tax Benefits
Get a tax deduction of 80 C for the amount of premium paid. Also, the survival benefits, maturity benefits, & death benefits are also exempt from the tax u/s 10(10D).
- Riders
Under this plan, rider options are also available at an additional premium cost, such as critical illness riders, accidental disability riders, death benefit riders, terminal illness riders, etc.
Eligibility Criteria
Provided below are the eligibility parameters to be met to buy a convertible plan:
- The insured's minimum age should be 65 years.
- The insured's maximum age should be 70 years.
- The insured should have been adhering to the policy's terms & conditions.
- An insured should have maintained a premium on a timely basis.
- There is a specific period within which the plan must be converted, mostly within the first 10 years.
- There is no requirement for any additional medical tests at the time of conversion.
Steps to Buy a Convertible Term Plan Online
Provided are the steps to buy a convertible term plan online:
Step 1: Search for the companies that provide convertible term life plans.
Step 2: With the help of online tools, get quotations based on age, coverage, & health requirements.
Step 3: Review the policy details, which will include conversion options & exclusions.
Step 4: The online application form should be filled out with your personal & health-related information.
Step 5: Get your medical tests done to finalise the policy process if required.
Renewable Term Insurance, Convertible Term Insurance, Whole Life Insurance Plan: A Comparison
|
Basis |
Renewable Term Insurance |
Convertible Term Insurance |
Whole Life Insurance Plan |
|
Premiums |
Premium gets increasing with every renewal. |
There is a lower premium at the start but increases in conversion. |
Higher premium, which remains constant throughout the tenure |
|
Cost Over Time |
Increases with time |
Lower at the start, but increases on conversion |
Higher cost premiums are fixed |
|
Cash Value Component |
No cash value |
No cash value unless converted |
Accumulates over time |
|
Permanent Coverage |
It is not permanent but can be renewed |
Can be converted |
Provides permanent coverage |
|
Choice of Coverage Lengths |
Fixed-term, renewable |
Fixed Term, but can be converted |
Lifetime |
|
Level Premiums |
During the tenure at the level, increases in renewal |
During the tenure at level, increases in conversion |
Level premium throughout the policy tenure |
|
Health Exam Required |
Not required |
No new exam required |
Required initially |
|
Ability to Withdraw Cash Value |
Not Applicable |
Possible, in case of conversion |
Yes, can withdraw or borrow against the cash value |
|
Guaranteed Death Benefit |
Yes |
Yes, in case of conversion |
Yes |
|
Eligible for Dividends |
No |
No |
Yes, in the case of participating policy |
|
Policy Structure & Provisions |
Term Plan, with a conversion option |
Term Plan, with a conversion option |
A permanent policy with cash value & level premiums. |
Pros & Cons of Convertible Term Plan
Let us first discuss the pros of the convertible term plan:
- Flexibility
There is no requirement to get additional medical tests done on conversion of the policy.
- Guaranteed Coverage
Provides guaranteed coverage, even if the health does not support it.
- Cash Value
They build cash value over a period of time that can be used as an investment or borrowed.
- Mental Peace
As it provides long-term financial security to the family members of the insured, he/ she has peace of mind.
Now let us discuss the cons of the convertible term plan:
- Higher Premium
They are considered to be more expensive than the standard term plans because of added flexibility.
- Complexity
They can be complicated as per their terms & conditions.
- Not Mandatory
In case coverage is required for a specific tenure, a standard term plan may be more cost-effective.
Conclusion
A convertible term plan can be converted into permanent life insurance policy that provides a lifelong coverage. It allows the policyholders to build a cash value that grows over a period of time. There is no need for a new medical examination, making this plan an ideal choice for those whose health has deteriorated. Also, it provides death benefits that remain consistent for life.
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