What is meant by “term conversion” in life insurance?

Term conversion refers to the process that allows policyholders to change their term life insurance policy into a permanent life insurance policy, such as whole life or universal life, without needing to undergo a medical exam. This option is particularly valuable for individuals who may have developed health issues or concerns since their original policy was issued, as it guarantees the conversion regardless of their current health status.

This feature is often included as an option in many term life insurance policies because it provides flexibility and security for the insured. If the insured initially chose a term policy for its affordability but later desires the lifelong coverage and cash value benefits of a permanent policy, the term conversion option allows for this transition seamlessly.

Other options do not accurately describe the term conversion process; for instance, switching to a cheaper rate or converting the policy to an annuity is not part of the standard term conversion feature. Similarly, term policies do not typically have cash value, so there would be no ability to receive cash from such a policy.