Should I Convert My Term Policy to a Cash Value Plan?

Dave Ramsey recommends term life insurance plans instead of cash value policies because, if you are working the Baby Steps, you won’t need life insurance for your whole life. By purchasing a 15 or 20-year term (in some cases, even a 30-year) policy equal to 10-12 times your income at an affordable premium, you can attack debt and grow your savings, becoming self-insured by the end of the term. Cash value plans, such as whole life insurance, include “savings plans” with extremely low rates of return, resulting in unreasonably high premiums. It is the smartest move to stay away from cash value plans.

The only time it might make sense to convert a term life insurance policy to a cash value plan is if the conversion or guaranteed-level premium period is about to end and you have developed a  terminal illness or a condition that prevents you from being insurable in the future. In that case, if you are in debt and still need life insurance coverage, converting to a whole life policy may be your only option. Keep in mind, however, that this is a last resort, and is not a recommended approach for the vast majority of people (other than the agent who gets a commission)! If you’re still not sure whether your personal situation calls for converting policies, reach out to one of our Guides at 1-800-356-4282, and we’ll talk you through it.