Life insurance companies offer a variety of riders or policy add-ons to customize your insurance coverage. Some come at no additional cost and are built into the policy, while others have an additional cost.

Term Rider and Term Conversion often get confused, so let’s review the differences.

Term Rider

This rider is a cost-effective way to provide an extra amount of insurance for a specified period like 10 or 20 years.

A term rider is added to a permanent policy like a whole life or universal life policy.

This could be a good fit for parents who have young children and for those with a mortgage or other large debt that is temporary. The additional protection during child rearing years and during the mortgage loan would help cover those important time periods. As children grow up and become independent and after the mortgage is paid off, the term rider expires, and you no longer have or need the extra coverage.

Term Conversion

Most term life insurance companies automatically include this provision. It allows you to convert your term policy to a permanent policy by the end of the term or by a certain age without going through underwriting or a medical exam.

When you convert your policy, you get to keep the health rating you had when the policy was first issued.

You will pay more to extend coverage for the rest of your life, but it likely will be less expensive than applying for a new separate permanent policy because you would be older and your health may have declined. Some companies may allow you to convert to a whole life or universal life policy while others may only give you one option.

This could be a good fit for people whose health has declined or if you’re worried about developing health problems in the future. It’s also good for people who still have dependents that rely on your income or if you have any outstanding debts that you don’t want to leave to your family.

The Bottom Line

A term rider and term conversion are both valuable features available in life insurance policies. Talk to your independent life insurance agent to see if the term or term conversion riders would be a good fit for you.