When a term life insurance policy reaches the end of the term, or the conversion deadline, the policy owner is faced with the decision to lapse the policy, let the policy continue and pay future rapidly increasing term premiums, convert the policy into a permanent product, or purchase a new life insurance policy to replace the existing policy.

When considering these options, the viable long-term solutions are to convert the policy into a permanent product or purchase a new life insurance policy. However, if the policy insured's health has declined and they no longer qualify for a new life insurance policy, the option that remains is converting into a permanent life insurance policy.

When considering a conversion, the next consideration is paying the higher premiums to carry the permanent policy. Often times a $1,000/year term policy premium can increase to over $10,000/year for the same policy amount as a permanent product.

Faced with this dilemma, letting the policy lapse or converting only a portion of the term policy becomes option of choice. In a partial term conversion, only a portion of the policy amount is converted to reduce the premium burden. For example, a $1,000,000 term policy could have a premium of $5,000/year. To convert the entire policy would require $50,000/year of premiums, but to convert only $100,000 would maintain the current premium of $5,000/year. In situations like this, a policy owner may select a partial term conversion and let the remaining policy amount continue or lapse.

There is a better alternative, and it involves selling the entire term policy or the remaining policy amount instead of letting it lapse. In the example above, the policy owner could do a partial term conversion of $100,000 and sell the remaining $900,000 through a life settlement. This provides value for the life insurance that would have otherwise been lapsed.