Converting Term Life Coverage to a Whole Life Insurance Policy

Convertible term life insurance can be a reliable solution when you are deciding between a term and a whole life insurance policy. Term provides coverage that lasts for a set period of time to fit the budget for the time being. Whole life is permanent; it provides you with protection for life as long as you pay your premium when due

and your premium stays the same for as long as you keep your policy. Convertible life insurance gives you the opportunity to update term coverage to permanent. A decision to go with term does not have to be final; New York Life makes it simple for policy owners when they are interested in converting1 term life insurance into permanent life insurance as their careers advance and they can afford higher premiums.

Convertible term life insurance essentially gives you the option to change your type of insurance coverage as your life changes. Here are some of the flexible benefits of converting term life insurance:

Converting term life insurance to permanent coverage can be done without a medical exam.

Many people decide against getting life insurance or select the minimum amount of coverage in order to avoid the mandatory medical exam. When you convert your New York Life term policy to permanent coverage, though, it can often be done easily and generally without another medical exam, if you convert within your conversion period as defined by your policy. Additionally, your new permanent policy premium will be based on the rate class from when you originally purchased your term coverage and had a medical exam. The cost difference can be significant if you’ve had term coverage for a while and are now several years older.

Beyond permanent coverage, whole life insurance provides long-term peace of mind.

Term life insurance provides adequate coverage, but there’s an expiration date on the policy, and premiums can increase substantially when it’s time to renew. Term coverage is an ideal choice when you have significant obligations that have an end date—like paying off the mortgage or seeing your children through college. For these situations, a term policy that ends shortly after your obligation ends is perfect.

Whole life is needed for obligations that will not end—to your spouse, for example, or if you want a legacy for your children and grandchildren. Making sure your family is protected is crucial when your children are young. Term may better meet the budget, so if money is an issue, term is the way to go for pure protection for a known time period. But gradually converting some or all of your term to whole life will give you the peace of mind that comes with knowing that your family will always be protected if something happens to you, and you will no longer have to be concerned about the expiry date of your term life insurance policy.

Converting to whole life insurance can provide cash value accumulation.

Premiums are higher for permanent life insurance, but there is a significant upside: Cash value accumulates in the policy and grows tax-deferred. Whole life policy owners are also eligible to receive dividends. Dividends are not guaranteed, but New York Life has paid dividends every year since 1854. They can be taken in cash, used to help pay premiums, or used to purchase more insurance (which will also be eligible for dividends). And the cash value of your whole life policy can be accessed2 to help with major expenses, like college tuition or a down payment on a house.

You have options and flexibility in how you choose to convert to permanent coverage.

New York Life has a number of whole life insurance solutions to choose from. When you convert, you can decide on the amount of whole life you can afford and keep the remainder of your term coverage in place, so you don’t find yourself underinsured. Keep in mind that your premiums will increase when you eventually convert your full coverage to whole life. If you convert earlier, though, you’ll have more time to accumulate cash value within the policy.

Term coverage is popular because it’s less complex and more budget friendly than permanent insurance. You may think it’s all you’re going to need. But bear in mind that your health and your needs may change. And if they do, the option of converting term life insurance to a whole life policy will be valuable.

If you’re unsure about whether term or whole life coverage is right for you, or if you’re considering convertible life insurance, connect with a New York Life financial professional to learn more about your options.

Life Insurance Dividend Options

Active senior woman having discussion with agent about her retirement investment plan
As a mutual life insurance company, New York Life has remained financially strong for over 175 years—always honoring policy commitments and, for 166 consecutive years, life insurance dividends have gone to eligible participating whole life policyowners. Dividends on whole life insurance are not guaranteed but New York Life has paid them every year since 1854.

How does it work?

As a whole life policyowner with New York Life, you’re a member of the mutual company and, as such, eligible to receive dividends on life insurance. Each year, the company carefully evaluates its investment results, claims, expenses, and results from other business lines before it considers how much to return to participating policyholders as dividends (deemed returns of premiums). If the company actually paid out less than was originally forecasted, those results can support the dividends.

When dividends are awarded, New York Life policyowners are provided with a variety of options on how their dividends can be used. Afterall, whole life dividends are returns of premiums you’ve paid.

Life insurance dividends are a fundamental part of New York Life’s business, providing policyowners with ongoing benefits. In 2020 alone, $1.9 billion in dividends are being paid to New York Life clients.

As a New York Life policy owner, your life insurance dividend can be used in different ways.
You can use your dividend to purchase additional life insurance, which will increase your cash value, or you can also use it to offset the cost of your insurance premiums.

The most efficient way to build your annual dividends into your financial strategy is to work directly with a New York Life financial professional. You have options on how you choose to use a dividend, so it makes sense to get some guidance from an expert who can help you optimize your financial growth over time with the right savings vehicles. Getting the most out of your New York Life solutions will put you on the path to a secure and comfortable future.

Buying life insurance for the first time?

Are you considering buying life insurance for the first time? Here are six tips on how to get the right life insurance for you and your family.
A couple at a table signing paperwork with an agent.

Things to consider when buying life insurance.

1. Why you need life insurance?

Most of us need life insurance at some point in our lives. But don’t buy a policy just because you heard it was a good idea. Life insurance is designed to provide your family with financial security in case you, your spouse, or a parent passes away.

Life insurance can help pay off your mortgage, help with college expenses, help fund your retirement, and help with estate planning. If you have loved ones who depend on your income for support, you should strongly consider getting life insurance. Also, the younger you are, the less expensive life insurance will be, so even if you don’t have an immediate need you may want to consider purchasing a “starter” policy for the future.

How much coverage should I buy?

You can use any number of planning tools to get an idea of the amount of coverage you’ll need for your policy. The easiest way is to simply take your annual salary and multiply by eight.

Another way: Multiply your annual income by the number of years left before your retirement benefits kick in.
You can also add up the expenses you think your family will incur after your death, such as a mortgage, school bills, and car costs. Then take your ongoing yearly expenses and divide them by 0.07. That translates to you needing a lump sum of money earning approximately 7% each year to pay those ongoing expenses. Add to that amount the money you’ll need to cover one-time expenses at death, and you’ll have a rough estimate of the amount of life insurance you need.

And of course, you can also use our life insurance calculator to help you determine how much protection you may need.
As useful as calculators and rough estimates are, they cannot provide you with final answers. Calculators only allow you to perform “hypotheticals,” recalculating and generating new results as you make and input new assumptions.

Using these tools and educating yourself on the workings of life insurance and other financial products, however, can help you feel more comfortable when discussing your needs with a financial professional like a New York Life agent.

Finding the right life insurance policy.

Once you figure out how much coverage you’ll need, you’ll need to find the best insurance policy. Your main options are term life, which may better fit your current budget, or whole life, for permanent coverage that also grows cash value.

Consider term life for:

Death benefit protection without cash value accumulation.
Life insurance on a limited budget.
Ability to convert to long-term life insurance.

Consider whole life for:

Long-term death benefit protection.
Stable cash value accumulation.
Potential to receive dividends.

Check out the insurance provider.

An insurance policy is only as good as the company that backs it, so make sure you choose a company you can rely on to be around for as long as you’ll need your coverage, and one that is highly prudent and financially strong in order to ensure that the claims of its policyholders can be paid.

New York Life Insurance Company is one of the largest mutual life insurance companies in the world.1 Being mutual means our primary focus is on creating long-term financial safety and stability for our policy owners.

Consult a financial professional.

A financial professional can help you factor in your financial considerations, your needs, and your family’s needs. Ask your financial professional about any aspect of a financial policy or product that is not clear to you. Review your insurance coverage with your financial professional on a regular basis to ensure that the coverage is keeping up with changes in your needs and income.

Know the lingo.

With terms like “premium,” “dividend,” “beneficiary,” and so on, understanding how life insurance works can be confusing. To help you understand this whole process, we have put together a glossary of insurance terms to help you understand this process.

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