The Term-to-Permanent Conversion: A Guide to Calculating the New Premium

While the guaranteed convertibility of term life insurance is a major benefit, understanding how the new permanent policy premium is calculated is essential for financial planning. The calculation is based on the “Attained Age” method.

The Attained Age Calculation

When you convert term coverage, the new permanent premium (for Whole Life or UL) is based on two primary factors:

• **Current (Attained) Age:** The premium is calculated using your age at the time of conversion, not your age when you purchased the original term policy. This means the premium will be higher than if you had bought permanent coverage initially.
• **Original Health Class:** Crucially, the premium calculation uses your original, better health class from the term application, bypassing the need for a new medical exam, which could have resulted in a Substandard Rating.

Avoiding the “Issue Age” Conversion

Some policies offer an “Issue Age” conversion, where the premium is based on your original age, but you must pay the back difference in premiums plus interest, which is often prohibitively expensive.

Disclaimer: This content is for informational purposes only and is not financial or legal advice. Always ask your agent for a detailed illustration of the new permanent premium before initiating conversion.