A Convertible Term Plan is a temporary plan that can be converted into a permanent plan which will not expire. It means buy a low premium cost term plan initially, while on the other h& keep your options open to convert the plan at a higher premium cost.
Things to Be Kept in Mind
Before the conversion of a term plan, mentioned are some factors to be taken into consideration:
- Conversion Options
One should be well aware of the policies available to which old policies can be converted.
- Conversion Deadline
One should be well aware of the deadline, i.e. the last date by which the conversion option is available.
- Medical Exams
No re-assessment of health issues has been performed.
- Death Benefit
Make sure that the amount to be received as death benefit after conversion is enough to meet your financial obligation.
- Premium Costs
The premium cost which can be calculated using a term insurance calculator on the higher side post conversion.
- Cash Value
The converted permanent policies generate cash value over a period of time, which can be borrowed or withdrawn.
- Partial Conversion
One should be aware of the possibility of partial conversion.
Why Should You Buy A Convertible Term Insurance Plan?
Provided are the reasons one should buy term insurance that has the two-in-one benefits of a convertible term plan:
- Flexibility
One can start with the policy at a lower cost& get the same converted into a permanent one without getting the medical check-up once again.
- Cost-Effective
The term plan is affordable at its inception as compared to the permanent one.
- No Health Reassessment
On conversion, there is no need to get reassessed for medical check-ups. It means that the health status will not have any impact on the premium amount.
- Long-Term Security
Converting your plan into a permanent one provides mental peace, as there is an assurance that it will protect our loved ones in our absence.
- Savings Component
A permanent life insurance policy includes a saving factor that will accumulate cash value with the passage of time.
- Premiums with No Payout
In most cases, death benefits are not to be paid due to the policyholder surviving the policy, but there arises a concern in mind as to the waste of money. On the contrary, conversion helps to convert to a permanent plan that builds cash value over a period.
Who Should Buy A Convertible Term Insurance Plan?
The convertible plan is best suited for the following individuals:
- Who Need Flexibility
In case one is not sure about the long-term insurance requirements, the convertible plan allows one to get started with a low-cost term plan. Afterwards, the plan can be converted into a permanent one.
- Who Expects Financial Changes
This plan is also suitable for those young individuals who expect an increase in future income or responsibilities.
- Who Have Health Concerns
In case you are diagnosed with a serious health issue, getting the plan converted into a permanent one will ensure the continuation of coverage.
- WhoNeedsLong-Term Coverage
This plan is also suitable for those who want financial coverage for a longer period.
When to Buy a Convertible Term Insurance Plan?
Below are some of the key considerations to decide when a convertible plan should be bought:
- Early in Life
To lock in lower premiums, it is advisable to buy a convertible plan at your younger age. This is because the plan can be converted into a permanent one afterwards without having any formality of medical check-ups to be performed.
- Before Major Life Changes
Consider converting the plan before your major life events, such as marriage, children, purchase of a home, etc.
- Anticipating Income growth
If one expects a hike in future income, buy a reasonable plan today & get the same converted tomorrow into a permanent one.
- Changing Financial Needs
If you expect your financial requirements to change in the near future, get the plan converted into a permanent one, as it offers flexibility.
- Health Concerns
In case you have a family history or health issues, this plan offers a permanent plan without any health check-ups.
- Within Conversion Period
The policy should be converted within a specific time period, normally 5 to 10 years from the date of purchase or before achieving a specific age of 65 & 70.
Documents Required
Provided is a list of documents required to be submitted along with the application form:
- Income Proof
- Salary slips – last 3 months
- Form 16
- Income Tax Returns for the last 3 years
- CA certificate for self-employed
- Bank statements – last 6 months
- Identity or Address proof
- Aadhaar Card
- PAN Card
- Electricity Bill & Rent Agreement (Address Proof)
- Voter ID
- Driving License
- Passport
- Nominee Details
- Address Proof
- Identity Proof of Nominee
- Medical
- Lab Test Reports
- Medical Examinations
- Age Proof
- Aadhar Card
- Passport
- Certificate of Birth
- School or College Leaving Certificate
- Other Documents
- Bank Account Details
- Policy Proposal Form
- Photograph
Some Other Types of Term Plans
Provided are some other term plan types:
| Types of Term Plans | Description |
| Increasing Term Insurance | Under this plan, the amount of the sum assured increases at specific intervals during the policy tenure. |
| Renewable Term Insurance | This plan can be renewed at the end of the tenure without a medical exam but has higher premiums. |
| Decreasing Term Insurance | Under this plan, the amount of sum assured decreases over time& is often used for mortgage or loan protection. |
| Level Term Insurance | This plan provides a fixed amount of sum assured & premium throughout the policy tenure. |
| Return of Premium Term Plan | Here, the insurance company returns the premiums paid in case the policyholder survives the policy. |
Conclusion
Convertible term plan offers a flexible coverage that can adapt itself to the changing requirements, making it a smart choice for those looking for a future-proof financial protection.
