A Life Insurance conversion option allows you to continue your cover without answering new medical questions when your original policy ends, provided you meet the insurer’s terms and conditions. It can be invaluable if your health has changed since you first took out your policy.
Imagine you take out Life Insurance today while you’re fit and healthy.
Twenty years later, your policy is coming to an end, but you’d still like to keep some life cover.
Unfortunately, you’ve since developed a serious medical condition that makes it difficult—or even impossible—to buy a new policy.
That’s exactly the situation the Life Insurance Conversion Option is designed for.
Different insurers use different names, including Conversion Option, Protection Continuation, Convertible Cover and Guaranteed Cover Again.
Although the feature is broadly similar across insurers, the rules aren’t. Some offer greater flexibility than others, which is one reason the insurer you choose at the outset can matter just as much as the premium you pay.
However, they all aim to achieve the same thing: protecting your ability to keep life insurance if your health deteriorates.
Normally, if your Life Insurance policy comes to an end and you want to continue your cover, you’ll need to apply for a new policy.
That means completing another health questionnaire and, depending on your age, the amount of cover and your medical history, the insurer may ask for further medical evidence such as a GP report or medical examination.
If your health has deteriorated since you first took out your policy, you could:
A conversion option changes that.
Provided you meet the insurer’s terms and exercise the option within the permitted timeframe, you can continue your cover without answering new medical questions. The insurer bases its decision on your health when you originally took out the policy, not on any medical conditions you’ve developed since.
Sarah takes out €300,000 of Life Insurance at age 35 while she’s in good health. Twenty years later, her policy is due to expire, but she’s since been diagnosed with multiple sclerosis. Without a conversion option, she might struggle to arrange new cover. If her policy includes a conversion option, she may be able to continue her cover without answering any new medical questions, subject to the insurer’s terms and conditions.
Usually, yes*
When we’re arranging Life Insurance, we almost always recommend including a conversion option if it’s available and the additional cost is reasonable.
That’s because none of us knows what the future holds. You might still be in perfect health when your policy ends and never need the option.
However, if you’ve developed a serious medical condition, it could become one of the most valuable features of your policy.
Think of it like insurance for your future insurability. You’re protecting your ability to keep life cover, even if your health changes dramatically over the years.
*The only time we wouldn’t recommend paying for a conversion option is if your Life Insurance already runs to age 85 or beyond. As the policy is intended to provide cover for most of your lifetime, there’s usually little benefit in paying extra for the ability to convert it later.
People often focus on getting the cheapest premium today. However, if your health changes before your policy ends, saving a few euro a month could prove expensive if you can’t arrange new cover later. A conversion option helps protect against that risk.
That said, not all conversion options are the same.
Different insurers have different rules about when you can convert your policy, the type of cover you can convert to and the maximum age at which the option can be used.
That’s why it’s important to compare the policy features as well as the premium.
No.
Although several insurers offer a conversion option, the features can vary considerably. That’s why it’s important to look beyond the monthly premium when comparing Life Insurance policies.
Depending on the insurer, the conversion option may differ in areas such as:
Some insurers also include additional features that aren’t available elsewhere, while others have stricter conversion rules or lower age limits.
For most people, we believe it is.
You may never need to use the conversion option, just as you may never need to make a claim on your Life Insurance. However, if your health changes before your policy ends, you’ll be very glad it’s there.
The additional cost is often modest compared with the value of knowing you may be able to continue your cover without answering new medical questions.
Whether it’s worthwhile for you depends on your age, the type of cover you’re arranging and which insurer you choose.
Complete the short form below and we’ll explain how the conversion option works, whether it’s available with your chosen insurer and whether we think it’s worth including for your circumstances.
We’ll always explain the differences before you apply, so you can decide whether paying a little more for a stronger conversion option is worthwhile for your circumstances.
Central Bank Know The Customer Fact Find – Lion.ie
Written by Nick McGowan, QFA RPA APA
Nick is a qualified financial adviser and founder of Lion.ie, a multi-agency Irish life insurance and income protection brokerage based in Tullamore. He’s been helping people secure fair, transparent cover for over 15 years and was named Protection Broker of the Year 2022.
If you’d like straight answers without the sales pitch, learn more about Nick here.
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