Partial conversions with term carryover: help Clients keep more coverage

When Clients convert their term policies, they often don’t convert the full face amount to permanent insurance. But they may still need temporary insurance. Now, it’s easier for Clients to keep more of their coverage when converting term insurance.

In many cases, Clients who partially convert their eligible term policy to permanent insurance can carry over some, or all, of the remaining term coverage without underwriting. The remaining term coverage becomes a new term insurance benefit (TIB) on their new permanent policy.

There are two scenarios for carrying over term insurance without underwriting:

A T10 or T15 plan is in the first 7 policy years and the Client wants a longer term length on their TIB

Clients can carry over any term coverage they haven’t converted to permanent insurance as a TIB on their new permanent policy. The TIB must be for a longer term length than their original term plan. Their term coverage period would restart.

Clients can only partially convert a T10 or T15 plan to a T20 or T30 TIB on the permanent plan. The Client can’t convert a T10 to a T15 TIB even though this is a longer term length (see scenario 2 below). These are the same rules for term-to-term conversions.

We’ll only require underwriting if the Client decides to increase their total amount of life insurance.

Let’s take a closer look

Tembi, age 51 has a T10 policy for $750,000. She’s converting her term plan to a SunUniversalLife II policy for $75,000. Tembi’s T10 policy is in the first seven policy years. This means she can carry over $675,000 as either a T20 or T30 TIB.

The term policy is older than 7 policy years, or the Client wants the same term length on their TIB 

In this scenario:

  • The maximum amount of TIB is limited to three times the new base insurance amount.
  • The Client can keep the same term length or choose any longer term length, including T10 to T15.

Let’s take a closer look

Sarah, age 45, has a T10 policy for $500,000. She’s converting her term plan to a SunUniversalLife II policy for $100,000. Her maximum TIB will be three times the new permanent plan’s base coverage amount ($300,000). She can choose a T10, T15, T20 or a T30 for her TIB. 

To keep more of her term coverage, Sarah could convert $125,000 instead. Since she can carry over three times her new permanent plan’s base coverage, her TIB would be $375,000. This way, she can keep her total insurance amount without additional underwriting. 

To summarize:

Original term is within For partial conversion to permanent  May carry over remaining amount of term insurance without underwriting to:
First 7 Years T10 Permanent amount, plus carry over to TIB, does not exceed the original policy amount T20, T30
T15 T20, T30
T20 N/A N/A
T30 N/A N/A
Original term is outside
The first 7 years (or Client is keeping the same term length) T10 The insurance amount of the TIB cannot exceed 3x the base amount T10, T15, T20, T30
  T15 T15, T20, T30
  T20 T20, T30
  T30 T30

Convertibility privileges are one of the most valuable features of a term policy. It provides flexibility for Clients if their insurance needs change.

Things to remember about the term carry over option
Available when
  • The carry over option is a non-contractual offer. It’s only available on standalone convertible term products. 
Unavailable when
  • Partially converting a TIB to permanent insurance
  • Converting joint term policies
  • We’re waiving premiums up to and including the final conversion date on the original term
  • Converting from a group term policy
  • Carrying over a TIB to an in force permanent plan
  • We’ll base the rates for the new coverage on the life insured’s age when they convert. Any ratings will still apply. All rates are on an age nearest basis.
Risk classes
  • The new coverage will receive the same risk class as the original coverage.
  • If we issued the original policy with preferred rates, we’ll issue the new TIB with standard rates. Preferred rates are not available on TIBs.  
  • We’ll only require underwriting if the Client decides to increase their total amount of life insurance.

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See also Industry leading flexibility: Sun Life’s 7-year term to term conversion window