Term to Perm Life Insurance Conversion Tips

« Back to CP Learning Center

There are many types of life insurance policies that can help protect you and your family. Term life insurance can be an attractive choice for millennials who are looking for affordable coverage, especially if they’re not ready to commit to permanent, whole life insurance. Even better? While with a term life policy you get coverage for a defined length of time, there are policies that can be converted to permanent life insurance for part or all, of the coverage period down the line.  Permanent life insurance also has some key benefits on its own for millennials who may be ready for additional benefits now.

Here are a few key considerations for whether a term-to-perm conversion option is a good starting point for obtaining protection for your loved ones.

A closer look: Term life insurance

These type of policies are often more affordable than permanent life insurance policies with their lower premiums and flexibility, including coverage that lasts for a specified amount of time such as a 10, 20, or 30 year term. On some term life products, unique riders2 may also be available, such as the ability to donate an extra 1 percent of the death benefit—over and above the amount paid to the designated beneficiaries—to any qualified 501(c) (3) charity of the policy owner’s choosing.3

A closer look: Permanent life insurance

Permanent life insurance can be an option for millennials looking for life insurance coverage with additional unique benefits beyond traditional death benefit protection. A whole life insurance policy is that it is one that doesn’t expire as long as you make your premium payments on time. Permanent insurance policies typically combine a death benefit with cash value.4,5 When choosing permanent life insurance, you typically have a choice between whole life and universal life.6, 7, 8

The primary purpose of life insurance policies is to ensure beneficiaries receive a tax-free death benefit after your passing. Having life insurance may mean it’s possible to fund opportunities or realities without tapping into an existing savings account.While term life pays beneficiaries after you pass, that coverage term could end first. That’s where the benefits of converting to a permanent life insurance policy come into play.

Benefits of a permanent life insurance policy include providing cash value10 to potentially fund:

  • Your retirement
  • Education for you or a dependent
  • A gift to a family member
  • Donations to charity

One key note: You may have heard others talking about how expensive permanent life insurance policies are or that they only pay funds after your passing.11 Yes, permanent life insurance policies indeed cost more than a term life insurance policy, but that is not the entire picture.

Your income should be part of the many considerations when shopping for a life insurance policy. That’s why many will look at the types of policies that are available and choose one that fits their budget. If that means choosing a term life insurance policy first and converting it later, then you can still reap the benefits of that conversion while ensuring protection today.

Making the conversion: Benefits for now and later

Permanent insurance policies offer benefits that term policies don’t, so many find that it’s helpful to use them together12. Converting from term to permanent life insurance means you’re converting all or some of your term life insurance into permanent policies, like whole life or universal life.

While most policies include the option to convert, you may be able to add it as a rider if it isn’t. So, even if you decide to buy term life insurance now, you have the option to convert it to a permanent life insurance policy later13. Because permanent life insurance is based on your income, converting from a term to a permanent life insurance policy can be an affordable option. In other words, as your income increases and your protection needs change, your life insurance strategy can change with you by potentially converting to a whole life policy later.

It can be beneficial to work with a financial professional to help as you plan for a more protected future.


Brought to you by The Guardian Network © 2020. The Guardian Life Insurance Company of America®, New York, NY

2020-105830 Exp. 7/2022



2Riders may incur an additional cost or premium. Riders may not be available in all states.

3The Charitable Benefit rider is available on Guardian Level Term policies. Up to a maximum of $100,000. Subject to state availability. Guardian Level Term is issued by The Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware corporation whose principal place of business is 10 Hudson Yards, New York, NY 10001. 1 888 GUARDIAN (1 888 482 7342). Policy form numbers: GLT 10, 15, 20, 30: 20-GLT  Charitable Benefit Rider: 20-CBR GIAC

4All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

5Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.


7Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company’s board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.

8Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse.

9Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

10 https://www.allstate.com/tr/life-insurance/permanent-life-insurance-101.aspx

11 https://www.allstate.com/tr/life-insurance/life-insurance-myths-facts.aspx


13 https://www.insurance.com/life-insurance/life-insurance-basics/term-life-insurance-option.html

Published:  February 23, 2022