The main difference between Arizona term life insurance and whole or permanent life insurance is how long the coverage lasts. Term insurance policies offer financial protection for a given period of time, usually 10-30 years. Some term life insurance policies allow you to convert the term policy to a permanent life insurance policy within a certain number of years, while other term plans offer an accelerated death benefit when diagnosed with a terminal illness. The least expensive term life insurance policy typically will not include these additional benefits. In most cases straightforward term life policies without all the bells and whistles are best.
“Term to Perm” policies allow the term life policyholder to convert their policy to a permanent life policy without having to go through medical underwriting. The new permanent life policy will likely be priced at the same risk class as the term life policy. The downside of course is that permanent life insurance is considerably more expensive than term life, and you must choose to convert within a certain time period. As an example, if you purchased a 20-year term life policy you likely would have to choose to convert to permanent life within the first 12 years of the term policy… and be under the age of 70.
There are situations when converting from term life to permanent life may make sense. If your health status has changed for the worse AND you are within the conversion window, converting to permanent life insurance is most likely your only option if you foresee needing life insurance protection past the term life period. If your health status has improved since the time the term life policy was issued it’s probably best to apply for a new policy which will reflect a lower risk class based on improved health and longer life expectancy.
If your net worth has increased quite a bit and have a complex financial strategy, converting your term life policy to a permanent life policy may be advantageous. Or, if you have a need for inter-generational wealth transfer, have a child with special needs that will always be financially dependent, or business continuity planning is involved, all are reasons to consider converting from term to perm.