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Your term life insurance policy is set to expire, and you’re faced with a big decision—should you renew, replace, cancel, or convert your term life insurance into a permanent plan? Making the wrong choice could leave you without the protection your loved ones need.
Many people assume their only option is to buy a new policy or let their coverage lapse, but there’s another solution: term life insurance conversion. With this option, you can switch to a permanent policy without medical exams, ensuring lifelong coverage even if your health has changed.
Imagine securing a policy that never expires, builds cash value, and protects your family or estate no matter what happens. Whether you want to leave a legacy, cover final expenses, or create a tax-efficient asset, converting your term policy could be the smart move.
In this guide, we’ll walk you through how term life insurance conversion works, its benefits, drawbacks, and alternatives—so you can make the best decision for your future. Keep reading to learn if converting your term policy is right for you.
- Key takeaways:
- Most term policies in Canada include a conversion option, letting you transition from term insurance to a permanent policy without medical underwriting.
- Unlike term insurance, permanent policies (such as whole life or universal life) don’t expire and guarantee a death benefit payout.
- The available permanent products and the maximum age for conversion vary by insurance company, so it’s important to review your policy details.
What Is Term Life Insurance Conversion?
When you purchase a term life insurance policy, you agree to pay regular premiums in exchange for a tax-free death benefit—a lump sum that your beneficiaries receive if you pass away. This money can help your family maintain its lifestyle, pay off debts like a mortgage, or cover future expenses such as education costs.
As the name suggests, term life insurance lasts for a specific period, typically 10, 20, or 30 years. During this time, your premium remains level and predictable, meaning you lock in a fixed cost for the duration of your term. However, once the term ends, you’ll face a decision:
1. Renew the policy: This extends your coverage, but premiums can increase dramatically. Some policies offer renewal options with escalating costs, as shown below (the monthly cost shown is for $500,000 of coverage for a 35-year-old male non-smoker at standard rates):
2. Let the policy lapse: If you no longer need coverage, you can simply allow the policy to expire.
3. Convert to a permanent life insurance policy: This is where the conversion privilege comes into play.
Even if you choose the first option and renew your policy, most term life insurance plans have an ultimate expiry date, usually around age 85. If you need coverage beyond that, term life insurance conversion becomes a valuable option.
What is the conversion privilege?
The conversion privilege is a contractual feature included in most term life insurance policies in Canada. It allows you to convert your term policy into a permanent life insurance policy without needing to prove your insurability (i.e., no medical exams or health questions).
When you convert, you can only choose from the permanent life insurance products offered by your insurer at the time of conversion. These may include whole life insurance, universal life insurance, and term-100. Here are the key features of the conversion privilege:
No medical underwriting: You can convert your policy even if your health has declined.
Age limit: Most insurers set the conversion deadline at age 71, but this can vary amongst providers.
Flexible coverage amounts: You don’t have to convert the full amount of your term policy; partial conversions are allowed.
Rate class carryover: If you had a standard health rating on your term policy, you’ll keep the same rating when converting, even if your health has worsened.
For example, if you originally had a term policy with a 50% health rating due to a medical condition, that same rating will apply to your permanent policy after conversion. Conversely, if you were in good health when you first purchased your term insurance, you’ll retain your standard rating even if your health has since declined.
Additional term conversion options
Many insurers offer special conversion options, including:
Child term riders: If your term life policy includes a child term insurance rider, you may be able to convert it into a permanent policy for your child, typically up to a maximum of $100,000.
Joint first-to-die policies: If you and your partner are covered under a joint first-to-die term policy, you may be able to convert it into a joint first-to-die or joint last-to-die permanent policy, provided the eldest insured person is under the maximum conversion age (usually 71).
Temporary survivor coverage: If one person in a joint first-to-die policy passes away, the survivor may receive automatic coverage for up to 90 days. This temporary insurance can also be converted to a permanent policy.
Why Convert Your Term Life Insurance Policy To Permanent Coverage?
When you first purchased term life insurance, your primary goal was likely to provide financial protection for your family in case something happened to you. The death benefit could help cover expenses such as:
- Mortgage or rent payments
- Your children’s education
- Replacing your income for your dependents
- Other financial obligations like loans or daily living expenses
However, as you go through different stages in life, your insurance needs may change. There are two main reasons why converting your term policy to permanent life insurance might make sense.
1. Changing life insurance needs
As you get older, you may find that your financial priorities shift. While term insurance is great for covering temporary needs, it doesn’t offer the long-term financial security that permanent insurance does. You might want to convert to permanent insurance for reasons such as:
Estate planning: Permanent life insurance can help cover capital gains taxes on assets such as cottages, investment properties, or shares of a small business when you pass away. This ensures your loved ones receive their full inheritance, with taxes covered by the death benefit payout.
Leaving a legacy: Whether for your children, grandchildren, or a charitable organization, permanent insurance allows you to leave behind a financial gift.
Caring for a dependent with special needs: If you have a family member who requires lifelong care, a permanent policy can provide financial support even after you’re gone.
Cash value accumulation: Some permanent policies build a cash value that you can borrow against or withdraw during your lifetime, offering a tax-advantaged savings vehicle for high income earners and high-net-worth individuals.
2. Declining health and increased lifestyle risks
Whenever you apply for a new life insurance policy, you must go through underwriting, where the insurance company assesses your health, lifestyle, and risk factors. If your health has declined since you first bought your term insurance, you might:
- Be offered a new policy at higher, substandard rates
- Be declined coverage altogether due to medical issues
- Face limited policy options based on your new health status
By using the conversion privilege, you can bypass the medical underwriting process entirely, securing permanent coverage at the same health rating you had when you originally purchased your term policy. This can be a lifesaver if you’ve developed a condition like diabetes, heart disease, or cancer.
Additionally, certain lifestyle changes—such as taking up high-risk sports, getting multiple speeding tickets, or a history of substance use—can make it harder to qualify for a new policy. Conversion eliminates these barriers.
Benefits of converting term insurance
1. No evidence of insurability
The biggest advantage of conversion is that no medical exam or health questions are required. If you were in good health when you bought your term policy, you can keep your original health rating even if your health has worsened.
2. Quick and easy process
Even if you qualify for a new permanent life insurance policy, the underwriting process can be time-consuming and intrusive, often requiring:
- Answering detailed health and lifestyle questionnaires
- Submitting to medical exams and lab tests
- Long waiting periods before approval
Converting your term policy bypasses all of this, making it a fast and simple option.
3. Partial conversion option
Permanent life insurance is more expensive than term insurance. If a full conversion is out of your budget, many insurers allow you to convert only a portion of your term policy. This means you can convert a smaller amount (as little as $10,000, depending on the insurer) and keep the remainder of your coverage under the original term life policy.
You can even cancel the remaining term coverage if you no longer need it. This flexibility allows you to secure permanent coverage while staying within your budget.
4. Partial conversion with term reset
Some insurers also offer a term reset feature when you do a partial conversion. This means you can convert a small portion of your term policy into a permanent policy and reset the remaining term coverage to a new term length.
Example:
- You originally bought a $1,000,000 term-20 policy 10 years ago.
- Upon reviewing your insurance needs 10 years later, you realize you’ll need coverage beyond the original 20-year term but can’t qualify for a new policy due to health changes.
- You convert a small amount to permanent coverage and reset the remaining death benefit to a new 20-year term.
- This extends your term policy at lower rates than renewing it at the end of the original term.
This strategy is helpful if you don’t need permanent coverage but still want to extend your term policy at an affordable rate.
Drawbacks of term life insurance conversion
While conversion offers many advantages, it’s not always the best option. Here are some potential downsides to consider:
1. Limited permanent life insurance options
You can only convert to permanent products offered by your insurer at the time of conversion. This means you can’t switch insurance companies to access better products. Additionally, if your insurer discontinues a product, it won’t be available for conversion.
For example, if you bought a term policy from Company A, but Company B now has a better permanent policy, you cannot convert to Company B’s product—you’re stuck with whatever Company A offers.
2. Higher cost
Your premium will increase because permanent life insurance is designed to provide coverage for your entire lifetime, ensuring a guaranteed death benefit payout. In contrast, term insurance only lasts for a set period and may expire before a claim is ever made.
Additionally, the cost of your new permanent policy is based on your age at the time of conversion, meaning it will be higher than when you originally purchased your term policy.
However, if you need lifetime coverage, the cost may be worth it compared to other financial planning alternatives.
3. Irreversible decision
Once you convert your term policy to a permanent one, you can’t go back. This means if you later decide you don’t need permanent coverage, you can’t switch back to term insurance. Additionally, if your budget becomes tight, the higher premiums may force you to let your policy lapse.
Before converting, make sure that permanent life insurance truly fits your long-term needs.
How To Convert Your Term Life Insurance Policy
Converting your term life insurance policy into a permanent plan is a straightforward process. Since no medical underwriting is required, you don’t have to worry about your current health or lifestyle affecting your eligibility. Here’s how the process works:
1. Contact your insurance provider or advisor
Reach out to your insurance company or servicing advisor to discuss your conversion options. They will confirm:
- Whether your policy is still in force.
- Whether your term policy is still within the conversion period (each insurer has an age limit).
- The permanent products that are available for conversion.
2. Complete the conversion form
Your insurer or advisor will provide you with a conversion request form. On this form, you’ll need to:
- Indicate the amount of coverage you wish to convert.
- Select the type of permanent insurance policy (e.g., whole life, universal life, or term-100).
- Confirm personal details and sign the form.
3. Submit the form and wait for approval
Once you submit the completed form, the insurer will process your request. Since there are no medical exams or health questions, approvals are usually quick. You’ll receive a new policy contract outlining your new permanent coverage and premiums.
4. Start paying your new premiums
Your premium will increase since permanent life insurance costs more than term coverage. Once the policy is issued, you’ll start making payments based on the new rates.
If you choose a partial conversion, your term insurance policy may still remain active for the remaining amount unless you instruct the insurer to terminate the coverage.
Which insurance companies allow you to convert your term life insurance policy?
Not all insurance providers offer the same conversion options. Some companies provide multiple permanent product choices, while others have only one. It’s important to note that these are the products available as of writing, and could change in the future as the insurance companies introduce new products and discontinue other ones.
Nevertheless, it’s vital to review your options before purchasing term insurance, especially if you plan to convert it later.
The table below outlines various insurance companies and their available conversion options, along with their age limits for exercising the conversion privilege:
Insurance company | Available products for conversion | Age limit to exercise the conversion | Partial conversion with term reset |
|---|---|---|---|
Assumption Life | Non-participating whole life, participating whole life | 75 | No |
Beneva | Term-100, non-participating whole life, universal life | 71 | No |
BMO Insurance | Term-100, non-participating whole life, universal life | 71 | Yes. The permanent coverage on the new policy must be at least 50% of the total converted and reset amount |
Canada Life | Participating whole life, universal life | 70 | Yes. The permanent coverage on the new policy must be at least 40% of the total converted and reset amount |
Canada Protection Plan | Non-participating whole life | 70 | No |
Desjardins | Term-100, non-participating whole life, participating whole life, universal life | 70 | No |
Empire Life | Non-participating whole life, participating whole life | 75 | No |
Equitable Life | Participating whole life, universal life | 71 | Yes. The permanent coverage on the new policy must be at least 50% of the total converted and reset amount |
Foresters | Non-participating whole life, participating whole life | 71 | No |
Humania | Term-100 | 65 | No |
Industrial Alliance | Non-participating whole life, participating whole life, universal life | 71 | No |
ivari | Universal life | 71 | No |
Manulife | Participating whole life, universal life | 75 | Yes. The permanent coverage on the new policy must be at least 50% of the total converted and reset amount |
RBC Insurance | Term-100, participating whole life, universal life | 71 | Yes |
Sun Life | Non-participating whole life, participating whole life, universal life | 75 | Yes |
TD Insurance | Term-100 | 69 | No |
UV Insurance | Non-participating whole life | 70 | No |
Types of permanent life insurance you can convert to
When converting your term life insurance policy, you will need to choose a permanent life insurance product. Below are the key differences between the most common options:
Term-100
- Provides lifetime coverage with level premiums until age 100.
- Does not accumulate cash value like traditional whole life insurance.
- A simple and cost-effective option for those who want permanent protection at a lower cost than whole life insurance.
Whole life insurance
- Offers lifelong coverage with fixed premiums until age 100 or for a shorter payment period, like 20 years.
- Includes a cash value component that grows on a tax-deferred basis.
- Allows you to borrow against or withdraw from the cash value during your lifetime.
- Non-participating whole life has cash value growth that is fixed and determined by the insurer.
- Participating whole life allows you to earn dividends from the insurer’s profits, which can be used to increase the death benefit, grow cash value, or reduce premiums.
Universal life insurance
- Provides flexibility in premiums, death benefits, and investment options.
- Includes a cash value component, which can be invested in different options such as guaranteed interest accounts or equity and fixed income funds.
- Cash value grows tax-sheltered, but investment performance varies depending on market conditions.
If you prefer guaranteed growth, whole life insurance may be a better fit. If you want investment flexibility, universal life could be the right choice.
Alternatives To Converting Term Life Insurance
Before converting your term policy, it’s worth exploring other options that may better align with your financial goals. Here are a few alternatives to consider:
Replacement
Replacing your term policy involves cancelling it and purchasing a new one, whether it’s another term policy or a permanent one. The key advantage of replacement over conversion is that you’re not restricted to the permanent life insurance products offered by your current insurer—you can shop around for a policy that better suits your needs.
Replacement may be a good option if:
- You are in good health and can qualify for a new policy at competitive rates.
- You want access to different permanent life insurance options not available through your current insurer.
- You need a policy with better features, such as more investment options, higher cash value growth or enhanced coverage options.
However, before replacing your policy, make sure that your new coverage is fully in force before canceling your existing one. The last thing you want is to find out that you were declined or offered much higher rates due to health or lifestyle changes.
Renewal
Most term life insurance policies allow you to renew your coverage at the end of the term without having to undergo a medical exam. However, because you will be older at the time of renewal, premiums will be significantly higher than they were during the initial term.
Renewing may be a viable option if:
- You only need coverage for a few more years.
- Your health has declined, making it difficult to qualify for a new policy at standard rates.
- You want to reduce the coverage amount upon renewal to keep the cost manageable.
For example, if you want to cover your mortgage balance with term insurance and have just a few years left on your amortization, renewing for a short period with a lower death benefit is a more cost-effective option than converting to permanent insurance.
Extension (Exchange to a Longer Term)
Some insurers offer an exchange privilege, which allows you to swap your existing term policy for a longer-term one without medical underwriting. This option is useful if you realize you need coverage for a longer period than originally planned, but still don’t need permanent life insurance.
However, there are some limitations to consider:
- The exchange option usually expires within the first five years of your policy, so it may no longer be available when you need it.
- It does not provide lifetime coverage, meaning it won’t help with estate planning or tax-efficient wealth transfer.
If your primary concern is ensuring your family’s financial protection for a longer term, exchanging your policy may be a practical solution.
Cancellation
If you’ve determined that you no longer need life insurance—whether term or permanent—cancelling your policy might be the right choice.
You may no longer need coverage if:
- You’ve accumulated enough savings and assets to self-insure.
- Your dependents no longer rely on you financially for support.
- You no longer need life insurance for estate planning, tax-advantaged savings growth, or wealth transfer.
However, keep in mind that cancellation is permanent. If you change your mind later, you may have to reapply for coverage at higher rates or risk being declined due to health changes. Before making this decision, be absolutely sure that you won’t need life insurance in the future.
By considering these alternatives, you can make a well-informed decision that aligns with your financial goals while ensuring you have the right coverage in place.
Frequently Asked Questions
Is it worth converting term to whole life insurance?
It may be worth it compared to other options, even with the higher cost, if you need permanent life insurance for estate planning or tax-sheltered investment growth—things term insurance cannot provide.
Whole life insurance offers lifelong coverage, builds cash value, and can help with wealth transfer, tax-efficient savings, or providing for dependents with lifelong needs. However, if you only need coverage for a specific period, keeping your term policy or exploring other options like policy replacement or renewal may be more cost-effective.
How much does it cost to convert a term life insurance to permanent?
The cost of term life insurance conversion depends on factors like your age at conversion, gender, smoking status, rate class, type of permanent insurance, coverage amount, and optional riders chosen.
Permanent life insurance is generally more expensive than term insurance since it provides lifelong coverage and guarantees a death benefit payout. Additionally, since premiums increase with age, converting later means you’ll pay higher rates than when you first purchased your term policy.
What is the conversion privilege for term life insurance?
The conversion privilege is a feature in most term life insurance policies in Canada, allowing you to convert your term policy into permanent coverage without needing to prove insurability—no medical exams or health questions.
You can choose from the permanent life insurance options offered by your insurer at the time, such as whole life insurance, universal life insurance, or term-100.
Taking The Next Step: Is Term Life Conversion Right For Your Long-Term Plan?
Converting your term life insurance policy to permanent coverage can be a valuable option, especially if your financial goals have evolved, your health has changed, or you need lifelong protection. While conversion offers key advantages—such as avoiding medical underwriting and ensuring guaranteed coverage—it’s essential to weigh the costs, available permanent products, and alternative options before making a decision.
If you’re unsure whether converting your term policy is the right choice, we’re here to help. At Brian So Insurance, we provide personalized guidance and compare multiple insurers to ensure you get the best coverage for your needs. We don’t just sell insurance—we offer ongoing support to make sure your policy continues to align with your financial and personal circumstances as they evolve.
For a free, no-obligation consultation, email info@briansoinsurance.com or call 604-928-1628. We can also design a complete insurance solution, complete with term and permanent life, disability, health & dental, and critical illness insurance, to protect you against all of life’s risks.
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While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
