Retroactive Conversion

Definition - What does Retroactive Conversion mean?

Retroactive conversion is when a life insurance policy is converted to its cash value. However, instead of the cash value beginning to accrue on the date of the conversion, it is generated from the initial date that the policy was issued, which makes the cash value much higher than it would otherwise be.

Insuranceopedia explains Retroactive Conversion

Retroactive conversion can be an attractive option for people who do not initially want to purchase whole life insurance, but who want to be able to switch to a cash value policy later on. Retroactive conversion makes term life insurance more flexible and creates an extra incentive for people to purchase life insurance. A substantial amount of cash value can accumulate if a term policy lasts for years before it is converted to a cash value policy.

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