Exclusive of the term covered, term policies are of two
main kinds: (1) those which grant insurance only for the
specified term and are renewable only upon a satisfactory
medical examination: and (2) the renewable-term policy, the
conditions of which give the holder the option, at the expira-
tion of the first-term period or at the end of any subsequent
term period, to renew the policy without a medical examina-
tion and irrespective of the insured's health at the time of
renewal. The renewal of the policy, in other words, can be
effected by the insured by paying the premium for the age
then attained. Usually, however, the companies limit the
age (generally 55 or 60 years) at which such renewal term
policies may be issued, and in some instances the number of re-
newals permitted is limited. Where the term policy contains
no renewal privilege the insured may be placed at the disad-
vantage at the end of the term, of being without insurance
and of not being in a position, because of poor physical con-
dition, to secure a renewal of the contract or to obtain any
other form of life-insurance protection. In many instances,
also, the particular contingency which the term policy was
designed to cover, may still exist at the expiration of the
term, thus making highly desirable the privilege of renewing
the contract for one or more terms at the will of the insured
and without the possibility of denial on the part of the com-
pany.
Nearly all term policies also contain the so-called con-
vertible feature, i.e. the privilege on the part of the insured
of converting the policy into another type of contract upon a
proper adjustment being made in the premium charge. Some
companies extend this conversion right throughout the term
period, but the great majority grant the right only for a lim-
ited number of years, such as the first four, five, or seven
years of the term. Conversion is usually allowed into whole-
life, limited-payment, or endowment insurance. The ex-
change is usually allowed on any anniversary of the policy
during the period when conversion is permitted, and may be
effected in one of two ways. The new policy may bear the
date of the surrender of the original policy and the premium
thereon be that required for such new policy at the attained
age of the insured. Or, the new policy may be considered as
bearing the date of the original policy, in which case the
insured is usually required to pay to the company the difference
between the premiums which would have been paid on the new
policy if it had been issued at the same time as the original
policy, and the premiums paid thereunder for the same
amount of insurance, with interest on euch difference at a
certain stipulated annual rate. 1
The advantages of the conversion privilege become apparent
if we consider the disadvantages usually attaching to term in-
surance. At the time of taking out the policy the insured
may not have definitely selected the type of policy best adapted
for his needs. Following the issuance of the term policy his
circumstances may soon become such as to enable him to
take out adequate permanent insurance. Or he may desire to
utilize insurance as a means of accumulating an estate rather
than to use it entirely for protection against death. As soon,
therefore, as he concludes that term insurance does not meet
his present and future needs he may carry out his conclusions
by exchanging his term contract for one on the whole-life or
endowment plan in either of the two ways already suggested.
Moreover, another great value of the conversion privilege also
becomes apparent (where the policy does not contain a re-
newable privilege) when it is remembered that a consid-
erable percentage of the insured lives become physically im-
paired to such an extent during even the first five or seven
years following the issuance of the contract, as to make im-
possible the securing of any other plan of life insurance in a
reliable company. Under such circumstances a non-renewable
term policy may, because of its expiration before death, fail
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