How to Convert Term Life to Permanent Coverage

Converting term life insurance to permanent coverage means using a clause in your existing policy, the conversion privilege, to swap some or all of your term coverage for a whole life, universal life or Term-100 policy with the same insurer. No medical exam, no health questions, no new underwriting. The insurer issues the permanent policy at your current age, using the health class you had when the term policy was first approved.

The result is coverage that no longer expires and a premium that no longer rises. The cost of that certainty is a premium well above what you’re paying for term, which is why most conversions are partial rather than total.

Over almost three decades I’ve seen conversion be the single most valuable feature of a term policy for some families, and an unnecessary expense for others. This guide covers how the privilege works, when to use it, when to leave it alone, and the deadlines you need to know before it’s too late.

What the conversion privilege actually guarantees

The privilege is a contractual promise made when your term policy was issued. Read the specific wording in your contract, but in general it guarantees:

• No evidence of insurability. The insurer cannot ask about your health, order an exam, request records or test for nicotine.
• Your original rating carries over. If you were issued at standard or preferred non-smoker rates, the permanent policy is issued at the same class. If you were rated at issue, the rating generally carries over too.
• Any permanent product the insurer offers for conversion, at that insurer’s current rates for your age. Most allow whole life and universal life; many include Term-100.
• Up to the full face amount of the term policy, or any smaller amount subject to the product’s minimum.
• Available until the conversion deadline, which is printed in the policy.

What it doesn’t guarantee is the premium. Permanent rates are set at the time you convert, at your attained age, so the number you’ll pay is whatever the insurer charges a person your age for that product on that day.

Who benefits from converting

Insurers include the privilege because it makes term products more attractive and helps them keep clients at expiry. For policyholders, it solves one specific problem: what happens if you need lifelong coverage and can no longer qualify for it?

The people who typically benefit:

• Someone whose health has changed. A cancer diagnosis, a heart event, diabetes, a mental health condition. Any of these can make new coverage expensive or unavailable. Conversion ignores all of it.
• Someone who now has a permanent need. The term was bought to cover a mortgage, but now there’s a cottage with a large capital gain, an RRSP that will be taxed at death, or a child with a disability who’ll need support for life. Those needs don’t expire.
• Someone approaching a term expiry who wants a modest amount of coverage to last, without buying an entirely new policy.
• Business owners whose corporation owns the policy and who want a permanent policy for estate liquidity or a buy-sell agreement.

If none of those apply, and you’re healthy, you may be better served by a fresh underwritten policy, which I’ll come to.

Deadlines: the part people miss

Every conversion privilege has an expiry, and it frequently arrives earlier than the term itself.

Common deadline structure	Example
Conversion allowed to a set age	To age 65, 70 or 75, whichever the policy states
Conversion allowed until a set number of years before term expiry	Not in the final 1–2 years of a 20-year term
Whichever comes first	A 20-year policy bought at 52 with conversion “to age 70” loses the privilege at 70, two years before the term ends at 72

If you’re approaching 60 with a term policy, pull it out and find the conversion provision today. Once the deadline passes, the option is gone, and the only routes left are renewal at the policy’s high renewal rates or a new application with full underwriting. Our guide on what happens if you outlive your term policy walks through those alternatives.

Full vs. partial conversion

Almost nobody converts an entire $500,000 term policy to whole life. The premium would be a multiple of what they’re paying now. The realistic structure is a partial conversion:

• Convert the amount that represents your permanent need: final expenses, an estate tax bill, a legacy, support for a dependant.
• Keep the remainder as term for the years the temporary need continues, or let it lapse if the temporary need is gone.

An illustration for a healthy 45-year-old with $500,000 of 20-year term, indicative ranges only:

Structure	Coverage	Indicative monthly premium (healthy non-smoker)
Keep all as term	$500,000 term	Roughly $50–$70 (original rate, fixed for the remaining term)
Convert $100,000, keep $400,000 term	$100,000 whole life + $400,000 term	Roughly $150–$300 for the whole life portion plus the reduced term premium
Convert $250,000, keep $250,000 term	$250,000 whole life + $250,000 term	Roughly $350–$700 for the whole life portion plus the reduced term premium
Convert $500,000	$500,000 whole life	Roughly $700–$1,400

These figures are illustrative and vary considerably by insurer, product type (participating whole life generally costs more than non-participating or Term-100), payment period and age at conversion. They show the shape of the decision, not a quote.

Most insurers allow multiple partial conversions over time, so you can convert in stages as budget allows. Check your policy for minimums.

Which permanent product to convert into

The insurer’s conversion options usually include some or all of these. Our guides on term vs. whole life and universal life vs. whole life go deeper, but in brief:

Term-100. Level premiums for life, no cash value, coverage to age 100. The lowest-cost permanent option and often the sensible choice when the goal is simply a guaranteed death benefit. Our guide on Term-100 life insurance covers it.

Non-participating whole life. Guaranteed premiums, guaranteed death benefit, modest guaranteed cash value. More expensive than Term-100, with a cash value you can borrow against.

Participating whole life. Higher premiums, with dividends that can grow the death benefit and cash value over time. Popular for estate planning and for people who want the policy to do more than pay out at death. Our guide to participating whole life explains how dividends work.

Universal life. Flexible premiums with an investment component. Suits people who want to overfund the policy and grow tax-sheltered value.

Conversion locks you into one insurer’s permanent lineup. If their products are strong, good. If not, that’s a point in favour of shopping a new policy, assuming you can still qualify.

When to convert: the timing trade-off

Because the premium is based on age at conversion, converting earlier means a lower monthly cost but more years of paying it. Converting later means a higher monthly cost for fewer years. Over a lifetime the total often ends up in a similar range, so the decision usually comes down to two other factors:

1. Health. If there’s any sign your health is changing, convert sooner. The privilege protects you against future changes, not past ones, so it’s most valuable exercised before a diagnosis, and it’s the only route after one.
2. Cash flow. If a permanent premium would strain the budget today but not in five years, converting a small amount now and more later is a reasonable path, deadline permitting.

Conversion vs. a brand-new permanent policy

Conversion is guaranteed, but it isn’t always the best deal. If you’re healthy, a new permanent policy underwritten from scratch has advantages:

• Access to every insurer’s products, not just one. Whole life pricing and dividend performance vary meaningfully between companies.
• Possibly a better rate class. If you’ve quit smoking, lost weight or improved your health since the term policy was issued, new underwriting could place you in a better class than the one being carried over.
• Product design flexibility. You can choose a payment period, riders and structure without being limited to conversion-eligible products.

The disadvantages are the ones you’d expect: an exam, records, several weeks of underwriting, the possibility of a rating or decline, and a fresh two-year contestability period. Conversion typically carries none of that, because no new evidence of insurability is provided.

The practical approach is to do both at once: apply for a new policy while the conversion privilege is still open, see what the underwriter offers, then choose. Just don’t let the deadline pass while waiting on the new application.

How to convert: step by step

1. Find the conversion provision in your policy and note the deadline, the eligible products and any minimum amount.
2. Decide the amount. Work out your permanent need separately from your temporary need. Our guide on how life insurance fits into estate planning helps with the permanent side.
3. Get illustrations for each permanent product the insurer offers, at the amount you’re considering. A broker can request these on your behalf.
4. Compare against a new policy if you’re healthy, as above.
5. Submit the conversion request form. It’s a short administrative form, not an application. No health questions.
6. Confirm the remaining term. If you converted part, the insurer reissues the term policy at the reduced amount. Check the premium adjusts correctly.
7. Review beneficiaries and ownership on the new permanent policy; they don’t always carry over exactly as expected.
8. Keep the records together so your family knows both policies exist.

Mistakes to avoid

• Waiting for the renewal notice. By then the conversion deadline may have passed.
• Converting the full amount by default. Size the permanent piece to the permanent need.
• Not checking the insurer’s permanent products first. Know what you’re converting into.
• Cancelling the term before the permanent policy is issued. Keep both in force until the new policy is confirmed.
• Assuming a rated term policy converts at standard rates. The rating generally follows the policy. Ask.
• Ignoring the tax angle on corporate-owned policies. Conversion inside a corporation has valuation and capital dividend account implications. Confirm with your accountant.

None of this is legal or tax advice; for a complex estate or corporate situation, involve your accountant and lawyer.

How Hayes can help

Conversion decisions are where independent advice earns its keep. We’ll read your policy, confirm the deadline and options, request illustrations from your insurer, and at the same time quote a new permanent policy across 30+ Canadian insurers so you can see both paths side by side. If your health has changed, we’ll structure the conversion to protect the coverage you can’t replace. If it hasn’t, we’ll tell you honestly whether converting or shopping is the better value.

Compare quotes from 30+ Canadian insurers in about two minutes. Free, no obligation. If you’d rather talk it through, contact us and bring your policy; we’ll find the conversion provision together. For the broader picture on permanent coverage, our guide to whole life insurance cash value is a good next read.