No, we’re not talking about putting the top down on your car. While everyone enjoys having the wind blow through their hair on a hot summer day, this kind of convertible is a bit more practice.

We’re talking about convertible term life insurance.

What exactly is convertible term life insurance? Well, keep reading. You’re about to find out.

Most people buy term life insurance instead of whole life insurance because term life insurance is cheaper. Whole life insurance is insurance plus an investment, and usually an investment that really doesn’t pay off that well. The difference in cost between term and whole life is astronomical, and you can take the money you save and invest it somewhere you’ll actually see a good return.

Still, there is a way to get some value out of your term policy. A convertible term life policy lets you take your term life policy and then, at the end of the term, convert it to a whole life policy if you meet certain conditions.

This allows you to adjust your coverage as your family situation changes throughout your life. When your family is young, you want a term policy with a high payout amount to protect your family if something should happen to you. At that stage of the game, you’re paying for peace of mind.

Later on, however, once the term is up your family situation has changed. You don’t have small children dependant on you financially (although you may have grown ones). You’re looking at retirement, and you’re considering the financial changes coming your way during retirement.

At that stage, it would be beneficial to have a whole life policy. The policy has some value, and still offers coverage for final expenses.

You can have a convertible term life insurance policy that has a static premium through the entire life of the policy. Yes, premiums will be higher than with standard term life insurance, but they’ll be much lower than they would be with whole life.

Photo via ahisgett