I recently had a client ask me about which term product had a better conversion option: Met Life or ING?
To understand the explanation given, you must understand the two options available when the level term period expires on most term life insurance contracts.
Policy Options when Level Term Period Expires
Option 1 is to pay an annual renewable rate, which means your premium is no longer fixed, but rather increases year after year. Going into your purchase of a 10 to 30 year term policy, no one knows what that will cost. You do have a contractual guaranteed annual renewable premium in your initial contract, but the rate shown there is a worst case scenario and most likely the renewal premium due would not be that high.
Option 2 is to convert the policy to a permanent, sometimes called whole life or guaranteed universal life policy. However, this rate is also unknown going into your initial term insurance purchase, since we don’t know what permanent products will be available to convert to 10, 15, or 30 years down the line.
My response concerning ING vs. Met Life’s conversion options
After review of the conversion privileges available to the three Reliastar Life Insurance Company (ING) term products considered for purchase, the TermSmart 10, TermSmart 15, and TermSmart 20, as well as Met Life’s Guaranteed Level Term 10 to 20 year products, I can attest first to the convertibility option with all three products to one of ING’s permanent cash value policies without evidence of insurability as well as Met Life’s term products.
What type of permanent policy can you convert to?
Secondly, I attest to both ING and Met Life allowing you to convert without proof of insurability to “select” permanent products at the time of conversion. It is impossible to say for sure which company will have the lower priced conversion option 10 to 20 years down the road, because no one knows for sure which permanent products each company will have available to select at the time.
The conversion guidelines for ING’s TermSmart line of term products reads as follows:
“TermSmart plans are convertible, without evidence of insurability, to selected permanent plans issued at that time by the Company.”
Similarly, the guidelines for Met Life’s Guaranteed Level Term products read:
“Conversion can be made to select MetLife enterprise permanent life products available to the producer at the time of conversion.”
While nobody can predict future pricing of either company’s permanent product line, I can attest to the fact that based on today’s current pricing when comparing both companies best priced permanent products that guarantee coverage to age 121, ING’s premiums are lower in all three of your most likely conversion times, 10, 15, or 20 years from now at a $10 Million face value.
Replacing an ING or Met Life Policy
There are many instances when replacing your existing term policy makes more sense than converting to a permanent policy. Be sure to get quotes for a new term or permanent policy with a different carrier, to compare them to your ING or Met Life conversion illustration.*Written by Chris Huntley. Huntley Wealth Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.