How to Convert from Term to Universal Life for the Purpose of a Life Settlement
One misperception about life settlements is the idea that only those with universal policies can benefit from a settlement. In fact, individuals with term policies that they no longer want or need might be eligible for a cash windfall if they understand how to convert their term to universal.
It’s an all-too-common scenario: A policyholder allows a term life insurance policy to lapse because he doesn’t believe it will be worth anything on the settlement market. But a term policy can have considerable potential for profit for those who understand a few key guiding principles.
First, a term policy must include a conversion rider if it is to be converted to a permanent type of insurance. Many term policies are convertible, but the riders are usually purchased at the time the policy was purchased. Insurance agents can inform their clients about the conversion potential of their policy or it can be found in the policy contract.
Another important consideration is time, because term policies only cover a limited time period, and they can only be converted before the policy lapses or the conversion rider expires. If a conversion is possible, the policyholder will still want to make sure he or she qualifies for a life settlement before pursuing the conversion.
When a term policy meets these requirements, it can be transformed from an unwanted liability to an asset that can help offset health care costs or meet other retirement needs. Those who have consulted Magna’s easy calculator and determined that they might be eligible for a life settlement should then investigate the conversion potential of their term insurance. Here are three key reasons why a senior might pursue a life settlement for a converted term policy:
1. Premiums are too high. Often keeping up with premium payments becomes a burden for a policyholder, especially when a term policy is bought to fill a temporary need and that need passes. A life settlement can eliminate premium payments and provide a source of income with one transaction.
2. The policy is about to term out. When an individual realizes that a term policy is nearing its end, it’s a prudent time to pursue a life settlement. Every day seniors lose potential funds because they let policies lapse when they could have turned them into cash.
3. It is no longer needed or wanted. It is at no cost to an individual to explore the option and see if a life settlement could be worth value to help pay for continued retirement needs, health care costs or even investments.
Magna’s life settlement representatives are ready to answer questions and further explain the process to anyone who thinks that a settlement might be the right solution for their term life insurance policy. Request an appointment with us to help you request a conversion illustration from the carrier.