Best Life Quote

Replacing Whole Insurance Life with Term

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

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Life insurance can be purchased for any number of different reasons. Often, because life takes us through so many changes, the needs that life insurance was originally meant to cover may also have changed.

When this is the case, it typically makes sense to re-review your plan and alter the amount of your proceeds, the type of coverage that you carry, or both.

Should You Replace Whole with Term Life Insurance?

One of the biggest reasons why it may make sense to convert a whole life insurance policy to term is the amount of death benefit coverage that you can purchase. For those of you who are still young and in great health, this is common.

In these cases, the same amount of premium dollar will buy you a considerably larger term life insurance policy.

With this in mind, if you have just purchased a new home (with a large mortgage), have just started a family, and/or have other similar large financial responsibilities, then you may want to consider switching to the larger death benefit that a term life policy can get you.

Term Life Insurance Temporary Need

Another time when it might make sense to convert your old whole life policy into a term policy, instead, is if your need for coverage is now only “temporary.” In many cases, people purchase life insurance to cover a particular debt or need, and when that debt has been paid off, the need for the coverage is over.

a life insurance policy pile of papers

As an example, if you have life insurance to pay off your mortgage so that your family can remain in your home should something happen to you, but your mortgage balance will be paid off in ten years, then it may make sense to cover that need with an inexpensive term policy rather than a more costly whole life insurance plan.

A mortgage is one of the most common needs for term insurance. The benefit is you can buy a term plan which will exactly meet the need of your mortgage loan. Mortgages aren’t the only possible temporary need.

Another need we see a lot is student loans or business loans. Just about every college student is leaving school with a diploma and a pile of student debt. While most people don’t realize it, even college students could benefit from having one of these plans.

If you’re a small business owner or you’re a pivotal employee of your organization, a term insurance plan could be exactly what you need to protect your business.

Invest the Difference with Term Life Insurance

In many cases, whole life insurance policies are sold as being part life insurance coverage, and part savings vehicle. Yet, it can literally take years in order to see any type of gains in cash value within the life insurance contract. Even when the cash does start to increase, the interest rate is typically quite low.

A better way to get life insurance coverage, while at the same time allowing yourself the opportunity for a much better rate of return on your investment would be to convert your coverage to cheaper term life insurance and invest the difference that you will save in premium yourself.

In addition to being able to choose from thousands of mutual funds, stocks, and other types of investments, you will also be leaving your invested funds much more liquid. This way, if you need to access these funds in case of an emergency, you will be able to do so much more quickly than you would if they were invested in a whole life insurance policy.

Sure, going with investing the difference approach is going to require a LITTLE more work, finding the investments, etc., but it’s much more effective in the long run.

A whole life insurance policy can make a return on the money saved, but it’s nowhere near what you’ll make in other investment vehicles, not to mention the fees you’ll pay.

Insurance Factors to Consider Before Converting

Before converting your policy, there are some important factors that you should consider. These include:

  • How much coverage do you need? First, you will need to determine how much life insurance coverage you need. When converting the policy, will you need to increase, decrease, or keep the amount of proceeds the same based on your current needs?
  • Are you still insurable? You must also assess your current health situation and determine whether or not you are still insurable. If you are not, then you should definitely keep the coverage that you have, since you will not qualify for any type of new policy.
  • How long will you need insurance? Maybe you’re reaching a stage of life where you won’t need insurance. Maybe you will need coverage until you’re 80.

If you’re having trouble answering these questions, go ahead and us know. We can’t answer them for you, but we can walk you through the process.

Finally, Converting Whole Life to Term

Any time you are considering replacing a life insurance policy, it is important to first discuss your options with an experienced life insurance agent; specifically, one who has access to several of the major life insurance companies.

This way you will be able to compare a number of alternative policies, as well as obtain an unbiased option on which option is truly best for you and your coverage needs.

Life insurance replacement requires a number of steps, so it is also important that the agent you work with has experience in replacing such coverage. Be sure that if you decide to move forward with a new replacement policy, that you receive an illustration for the new policy, as well as any additional required information.

It is also extremely important that you never cancel one policy before your new replacement coverage is in place. This is because if the unthinkable were to happen, you don’t want your survivors to be left without any life insurance proceeds at all.

If you’re still wondering which kind of policy is best for you, either a term plan or sticking with a whole life policy, maybe you need some help. This isn’t a decision which should be made lightly.

Why not use the advice of insurance experts? All you have to do is call the number below.

With one simple call, you’ll be connected with qualified insurance agents who have years of experience in the industry. Not only can we point you in the right direction, but we can help you get there by offering more than 30 quotes from the top carriers across the nation.

If you would like to get term life quotes or discuss if it makes sense to replace your policy, use our quote form on this page to get started. 

Picture of Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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