The most noticeable difference is that term life insurance provides death benefits only for a specific time period (aka the “term”) with no cash accumulation, while whole life insurance provides death benefits while it accumulates cash over the course of the insured’s entire life.

But did you know that is NOT where the story ends? If you bought a term policy —and lots of people do for lots of good reasons— you probably have no expectation that it would ever have any real cash value. Maybe you got a term policy upon the recommendation of your CPA or banker who wanted you to have some coverage for loans on real estate or a buy-sell agreement. Whatever the reason, you are not alone.

Term insurance is the default option in the industry because it is the least expensive type of life insurance, specifically for the reason we already highlighted—it does not have or build any real cash value. Ordinarily, term policies are lapsed or not renewed when the insured reaches the end of that specified term.

Then what happens to that policy after it ends? For most people, it goes into the garbage. I have some good news—that doesn’t have to be the fate of your term policies. So how can these policies have value when most people think they are not even as good as the paper they are printed on after they expire? I’ll tell you exactly why and when they can have value.

One of the attractive features of most term policies is that they give the insured the option to convert the policy to a permanent policy up to a certain age (normally 70 or 75 years). Typically, this exchange requires neither underwriting nor a medical exam. This is good news for policy owners because it means they can convert a term policy into whole life insurance even if their health has started to decline.

It is important to understand that the premium’s new rate will be based on the age of the client at the time of conversion. Even if their health has declined, they are guaranteed the option to convert at the same health rating they earned when they originally took out the term policy.

Of course, the overall cost of whole life insurance is greater than the cost of term, but the potential arbitrage or value is the promise they can convert at their “old” health rating. So obviously, a term life policy can offer you the advantage of conversion to a whole policy. But chances are, you already knew that. Some people, however, don’t have any intention of converting their term policy to whole life. What about them? Is there any way to turn that policy into something more? Absolutely!!