A convertible term plan provides a policyholder with the flexibility to adapt to changing life circumstances. It sets affordable premiums in the early stages of life and offers the flexibility to switch to a savings-linked or permanent life insurance plan later.
Such a plan is particularly useful for those who are young, healthy, and unsure of their long-term insurance strategy. In the initial years, when responsibilities are low and income is still building, a pure term insurance is cost-effective. As life progresses, a convertible term plan allows an individual to migrate to a lifelong or savings-focused plan later, without buying a fresh policy from scratch.
Casparus J.H. Kromhout, MD and CEO, Shriram Life Insurance, says for young professionals who want affordable coverage now but might consider lifelong protection later — as a basic term plan covers a certain number of years only — a convertible term plan is useful. “For freelancers and entrepreneurs with unpredictable incomes, a convertible term plan gives room to upgrade the policy later,” he says.
How it works
A convertible term plan starts off like a regular term life insurance policy, offering a high sum assured at a low premium, payable for a fixed tenure of 20 or 30 years. For instance, an individual buys a Rs 1-crore convertible term plan at age 30. At age 40, with a convertible plan, the insurer will allow him to switch, often with just a revised premium based on his age at the time of
conversion. Such a plan is ideal for young professionals, early-stage entrepreneurs, or anyone in their
20s and 30s who want to keep costs low but maintain future flexibility. It is also beneficial for individuals with a family history of medical conditions, as it secures their insurability in the long term.
Vaibhav Kathju, founder & CEO, Inka Insurance, insurtech platform, says convertible plans give an individual control, flexibility, and future-proofing. “They are ideal for those who value long-term options but want to start small. In a market where needs evolve, this built-in switch gives you peace of mind and saves effort and money down the line,” he says.
What to consider
Every convertible plan has a time limit or age ceiling, usually between age 45 and 55, by which the policyholder must initiate conversion. Not all plans convert into all types of policies. Some plans allow switching to select whole life or endowment products. Check which plans are eligible for conversion and whether they suit your future goals.
Shilpa Arora, COO, and co-founder, Insurance Samadhan, says individuals should check the conversion window. “This is a crucial factor, as conversion is typically allowed for a given period, typically 5–10 years and on request, ” she says and adds that the premium structure for convertible term plans may be higher than standard plans due to the added flexibility.
While term plans are cheap, converted policies often come with higher premiums. Chetan Vasudeva, senior vice president, Business Development at Elephant.in, Alliance Insurance Brokers, says some insurance companies permit partial conversion, granting even more flexibility. “Verify whether the converted policy has the same benefits (such as riders or bonus features) or whether new documents are needed,” he says.
The insured should be aware of the death benefit and make sure if it is constant after the conversion. Some insurers provide updated terms or changed coverage under converted policy. If there’s a cash value component, like in whole life or endowment policies, know how this value builds up and if you can borrow or withdraw from it.
A 30-year-old male salaried individual, who is a non-smoker, is exploring term life insurance options with a policy term and premium payment term of 30 years. Based on his profile, the monthly premiums quoted by various insurers are as follows: Axis Max Life at Rs 910, Bajaj Life Insurance at Rs 843, iPruiProtect Smart Plus at Rs 1,026, and HDFC Life C2P Super at Rs 1,809, according to Inka Insurance.