Convertible Term Insurance

One would be forgiven for thinking that a product like Term Insurance should be pretty easy to understand. Normally, you pay a fixed premium for a fixed sum insured for a fixed term, end of story.

However, throw the word 'Convertible' in front of Term Insurance and a myriad of terms and conditions appear that are not standard throughout the Life Insurance Industry. 'Convertible' refers to the option of converting the existing policy to another type of policy, at some date in the future, without medical evidence.

The notion that price is the only deciding factor for a Convertible Term Insurance policy is a nonsense. Flexibility of the conversion option, in my opinion, carries much more weight.

In a recent e-mail survey of the Life offices offering Convertible Term policies in Ireland I asked a number of questions regarding the flexibility of the policy and what, exactly, were the policyholders options on the 'conversion' date.


Aviva/Hibernian Life - You cannot convert to a Pension Term Insurance. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.

Caledonian Life - You can convert to a Pension Term Insurance. Client would get non-smoker rates at date of conversion and existing policy can be altered (premium reduction) to take into account non-smoker status after qualifying period.

Canada Life - If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term. You cannot convert to a Pension Term Insurance.

Eagle Star/Zurich Life - You can only convert the policy at the end of the original term (not during). If you were a smoker when you took the policy out but qualify as a non-smoker now, full underwriting is required to change the policy. You cannot convert to a Pension Term Insurance.

Friends First - Non-smoker rates can be availed of at the end of the policy term if you are converting to a new policy, without full underwriting. Smoking status cannot be altered during the original term of the policy.

Irish Life - Converting to Pension Term Insurance is not an option. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.

New Ireland - No Response (yet!).


It is likely that the majority of the above companies will have to review their product offerings. The profitability of this type of product is dependent on the term that it stays in force. It makes no sense whatsoever to 'force' the policyholder to jump through hoops (ie. new application with full underwriting) if they need to make an alteration to an existing policy. It is hard to reconcile how a product provider can make money on these products when an alteration will, more than likely, drive their client to another product provider.

At the moment, the Caledonian Life policy offers the greatest flexibility, at a competitive price; but this is based on current underwriting practice.