Term life insurance is one that covers a particular period while permanent life insurance covers the whole period until you pass away. At times, your insurer may try to persuade you to convert from term life insurance to permanent life insurance. Here’s why you should not switch:
Monthly premium costs are high
Unlike the premium of term life insurance, the monthly premium cost of permanent insurance is much more expensive, almost ten times higher. If you convert after 20 or 30 years of your term insurance, you have to start paying higher rates at a time you should be saving up towards retirement.
Rate of return is usually lower
Usually, the rates of return on permanent life insurance are lower than when you put the money into other investments. As such, instead of converting to whole life insurance, extend your term life insurance or discuss with your financial adviser for better investment prospects.
Your family gets only the insurance policy
If you convert to permanent life insurance, your family would only get the insurance policy and not the investment money once you die. This insurance type is unlike term insurance where your family gets both the life insurance policy and your investments when you die.
Whole life insurance is more beneficial to your insurer
Why your insurance company will always inundate you with calls and letters, asking you to convert is because they earn more if you do. So instead of giving away your money to your insurance company by converting, why not invest it into a retirement account?