Partial conversion with term reset is a newer option offered by some companies that extends the renewable and convertible term life insurance options.
What it is: Partial conversion with term reset allows you to convert a portion of your term life insurance to permanent life insurance. The remaining amount of term life insurance can then be reset to a brand new term. This conversion and reset is done without medical requirements, and the new policy is at regular health class premiums.
Partial conversion with term reset allows you to extend your term life insurance policy, without a medical exam. i.e. you could for example in year 8 of a term 10 policy, extend your coverage out to a brand new term 20 policy, at the tradeoff of making a small portion of your policy permanent life insurance coverage.
e.g. you have $1,000,000 of 20 year term. After 15 years, you convert $25,000 of the coverage to a permanent life policy. The remaining $975,000 is then reset to a brand new 20 year term. This effectively extends your term life insurance, at the cost of a small amount of permanent life insurance.
When to use this option: You should investigate this if you have an existing term life insurance policy that you’re considering replacing for another term life insurance policy. You may be able to take your existing term life policy and extend it to a new, longer term life insurance policy, without a medical exam, with the tradeoff of a small amount of permanent life insurance.
It’s also useful if you’ve become uninsurable and are using the term life insurance conversion option. Under the standard conversion option, you convert a part of your term life insurance to permanent, and the remaining term coverage either continues for the duration of the original term, or it’s simply cancelled. If you’ve become uninsurable, the partial conversion with reset lets you convert a part of your policy to permanent, and still keep the remaining amount of coverage as much cheaper term life insurance. The impact of that is that you now have much more life insurance for a lower premium.
Tip: This provision is offered as ‘administration’ only. That means it’s not guaranteed in the policy. And that means the option can be revoked or changed at any time by the company.
Some common Partial Conversion with Term Reset examples:
If you are considering replacing your term policy or near the end of your term, or would like to extend your existing term, then the partial conversion with term reset can be an excellent way to get a new, extended term policy without any medical requirements. Please contact us if you’d like further information and a current quote.