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Should I Convert My Personal Life Insurance?

In this article, we provide a quick overview of what “converting your life insurance” means as well as some new conversion options available in the marketplace.

Converting insurance simply means changing it into a different contract type without answering pesky health and lifestyle questions. Converting typically relates to Life and Critical Illness Insurance, and the goal is normally to obtain long-term savings or coverage.

There are many different types of insurance which can be considered according to your situation. Here is a quick review from the Canadian Life and Health Insurance Association (CLHIA)

It can be difficult to anticipate what may happen in the future and your needs will change over time. However, it’s important to conduct a regular review of your policies and ask questions like:

  • Has something changed in my life?

  • What is different today?

  • Are my needs the same as what they used to be?

  • Do I need coverage for the short or long term?

  • Who will be my beneficiaries?

What Can I Convert My Term Life Insurance To?

Term: Term insurance is the most common type of coverage. It is low cost and is typically used to cover a significant need like a mortgage or income replacement for your family when children are young.

A typical Term-10 policy can now be converted to a wide range of other policy types, depending on the carrier you use: Term 10, 20, 30, or to age 65. With some companies, you can even pick a specific term.

Term to 100: Since this type of policy provides protection to age 100, the cost is higher than the above term options. However, the premium does remain level until age 100 if kept in force.

Permanent Insurance (including Whole Life and Universal Life): These policies offer a life insurance benefit as well as a savings component. The premiums are higher than term insurance, but these types of policies build cash values which can be borrowed or withdrawn in the future. Some clients will use these policies as a savings vehicle to round out their investment portfolio, and can be a good long-term fixed income alternative. The initial costs of these policies are higher than term insurance, so often a combination of term and permanent coverage is suitable for those individuals requiring a higher benefit amount.

Please refer to CLHIA’s Guide to Life Insurance for a summary of the various types of coverage.


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