What typically happens to the premium costs when a term policy is converted to a permanent policy?

When a term policy is converted to a permanent policy, the premium costs generally increase. This is primarily because permanent policies, such as whole or universal life insurance, are designed to provide coverage for the insured's entire lifetime, as opposed to a term policy which only covers a specified period. Permanent policies accumulate cash value over time and have higher administrative costs, all of which contribute to the elevated premium costs compared to term coverage.

Additionally, as the insured ages, the likelihood of claims increases, leading to higher premiums to reflect this increased risk. The conversion process does take into account any health issues the insured might have developed during the term, which can also lead to an increase in the premium. Therefore, understanding the cost structure associated with permanent life insurance is crucial for individuals considering converting their term policy.