How to Convert Variable Universal Life to Term Life

Convert my variable universal life to term life.

Variable universal life is a form of life insurance that combines many features of whole, variable and universal life policies. These features include flexibility of premium, investment control of cash value and flexible death benefits. While a unique feature of variable universal life insurance is the cash value to the policy owner held in a separate investment account, it shares many features with traditional whole life insurance. One of these features allows you the option, upon lapse or surrender of the policy, to convert the accumulated cash value to a purchase of a term insurance policy.

Things You'll Need

• Variable universal life policy
• Insurance agent or broker
• Accumulation of cash value

Instructions

1. Meet with your insurance agent or broker to review your variable universal life policy. Determine its original face value or initial specified death benefit, as well as it's current accumulated cash value based on investment returns, to determine the strength of the policy to decide if it qualifies for conversion to a term policy.

2. Research how long your accumulated cash value will purchase term insurance and verify the amount of term insurance you will be eligible to purchase, before making a decision to convert.

3. Go over any other supplemental benefits contained in the original variable universal life policy, such as any term riders, accidental death or disability benefits that may be lost as a result of forfeiting the policy.

4. Discontinue your variable universal life policy's premium payments, using one of your nonforfeiture options, called an extended term option, to convert your accumulated cash value to a term policy.

5. Use the cash value of the forfeited variable universal life policy to purchase a term life insurance policy equal to the original face value of the variable universal life policy for as long as the cash value will purchase. For instance, if your variable universal life policy had an original face value of $30,000, then assuming you have enough cash value, you could purchase an equal term policy of $30,000 for the number of years your cash value could afford.

Tips & Warnings

• If you have any concerns, make sure to discuss your decision with your agent or broker to determine if any options exist other than discontinuing your policy with a nonforfeiture option. Depending on the strength of your investment returns, you may be able to eliminate your premiums indefinitely or at least suspend or reduce premium payments, as viable options to forfeiting of the policy.

References

• "Florida Life, Health and Variable Annuity Study Manual"; Florida Association of Insurance and Financial Advisors; 2007