Most term policies give a buyer exactly one route to a death benefit that will actually be paid — conversion. State Farm Select Term arguably gives two, and the second one is the reason this policy deserves a closer look than a typical term contract.
Select Term has been offered in 10, 20 and 30-year level periods with coverage typically starting at $100,000, and it renews annually after the level period ends, with renewals available to advanced ages. A contract that can be renewed year after year into the nineties is not truly expiring in the way a policy that terminates at 75 expires. It becomes brutally expensive, but it can remain in force, and that possibility changes the arithmetic in a specific set of cases.
State Farm Life Insurance Company is an Illinois-domiciled insurer headquartered in Bloomington, writing through exclusive State Farm agents rather than independent brokerage. A separate affiliate, State Farm Life and Accident Assurance Company, issues in certain states including New York and Wisconsin, so confirm the exact entity on your declarations page before making calls. Product terms vary by issue year and by state, and the form number on your specifications page is the only reliable identifier.
In This Article
Two Routes to a Payable Death Benefit
A buyer purchasing a term policy becomes the owner and beneficiary and funds every future premium. Their entire return depends on collecting the death benefit, so they need the coverage to exist on the day the insured dies. Two contractual features can deliver that.
Conversion. The right to exchange the term policy for a permanent contract without new evidence of insurability, at the insured’s attained age. This is the standard route, and it produces a policy that runs to age 100 or beyond at a stable premium. It is also the route that expires — conversion windows typically close at an attained age such as 65 or 70, or at a fixed policy year, whichever comes first.
Annual renewal. The right to continue coverage year by year after the level period ends, at annually increasing rates. No underwriting, no application, and no deadline in the same sense — but the premium climbs steeply because it tracks mortality cost at attained age with no averaging.
For a policyholder, renewal is usually a bridge rather than a plan. For an institutional buyer valuing a policy on an insured with a short life expectancy, renewal can occasionally be the cheaper route, because paying two or three years of very high annually renewable premium can cost less than converting into a permanent policy and funding it. Which route the buyer models determines the offer, and it is not always the one you would expect.
Get the Numbers That Decide This
Your State Farm agent can pull all of these. Ask for them in writing, because a verbal answer that turns out to be wrong is not recoverable once a deadline passes.
- The conversion deadline, stated as a calendar date, plus the specific permanent forms your term form may convert into.
- The attained-age annual premium for each of those permanent forms, and separately the premium required to guarantee coverage to age 100 rather than merely keep it in force for the coming year. Those are different numbers on a universal life chassis.
- The annually renewable premium schedule for the years after your level period ends. Carriers do not publish these in a form you can estimate reliably, so get the actual table rather than a rule of thumb.
- Whether partial conversion is permitted, and the minimum conversion amount.
- Which riders survive conversion — waiver of premium and accelerated death benefit riders do not always carry over.
- Whether the policy is in force and paid to date, and any grace period status.
The shape of the renewal schedule is predictable even if the figures are not: it rises modestly in the first renewal years and then accelerates sharply, because mortality rates roughly double every seven to eight years in later life. By the late eighties, an annual renewal premium can represent a substantial fraction of the face amount. That is exactly why renewal works as a two or three year bridge and fails as a ten year plan. Background on conversion provisions is in what is a term conversion rider.
How a Buyer Chooses Between the Two Routes
The buyer runs both and takes the cheaper path, which is a useful thing to understand because it tells you which policies attract offers.
Where conversion wins: a longer life expectancy. If the modeled horizon is eight or twelve years, converting into a guaranteed universal life contract and paying a stable premium beats a renewal schedule that becomes ruinous in the later years. See what is guaranteed universal life.
Where renewal wins: a short life expectancy, typically under three or four years, where only a handful of renewal premiums will ever be paid. In that case the buyer avoids the conversion step entirely, which also avoids any question about whether the conversion window is still open.
Two consequences follow. First, an insured with a genuinely short life expectancy may have a marketable policy even after the conversion window has closed, provided the contract is annually renewable — which is unusual and worth checking rather than assuming the answer is no. Second, offers on term always sit below offers on comparable permanent policies, because either route requires the buyer to absorb a large step-up in premium. The general pricing model is described in selling a term life policy.
| Route to a payable benefit | How it works | Best when | Main drawback |
|---|---|---|---|
| Full conversion | Exchange for permanent coverage at attained age, no new underwriting | Coverage still needed long term | Premium rises sharply at attained age |
| Partial conversion | Convert a portion of the face amount | Full conversion premium is unaffordable | Subject to a carrier minimum amount |
| Annual renewal | Continue year by year after the level period | Short, defined remaining need | Premium accelerates steeply with age |
| Accelerated death benefit rider | Release part of the benefit on qualifying diagnosis | Terminal illness already certified | Reduces what beneficiaries receive |
| Life settlement | Sell the policy to a licensed buyer | Large face amount and short life expectancy | Months to close; below-minimum files are declined |
Size Is Still the Gate Most Policies Fail
Transaction costs in a settlement are close to fixed regardless of policy size: medical record retrieval from every treating provider, one or more independent life expectancy reports, legal review of the closing package, an escrow agent, carrier processing of the ownership and beneficiary change, and compensation to whoever brokered the file. Those costs run into the thousands and do not scale down.
The practical floor is roughly $100,000 of net death benefit, with a meaningful share of buyers declining anything under $250,000. On term specifically the effective threshold runs higher, because the buyer also absorbs the premium step-up. Select Term’s typical $100,000 entry point means many State Farm term policies sit right at or below the line. Thresholds are collected in minimum policy size for a life settlement.
Two other gates apply. The policy must be past its two-year contestability period, since buyers will not close on a contract the insurer could rescind for a misrepresentation on the application, and a reinstatement after lapse generally restarts that clock. And ownership must be clear, with a trustee holding a documented power of sale if a trust owns the policy.
Your Own Decision: Four Paths
Set the settlement question aside for a moment and decide what actually serves your household.
Convert in full when you still need permanent coverage and can carry the attained-age premium indefinitely. Ask for the premium that guarantees the policy to 100, not the one that keeps it in force this year.
Convert partially when full conversion is unaffordable. Converting $75,000 of a $300,000 policy costs roughly a quarter of a full conversion, leaves permanent coverage that will actually pay, and lets the remaining term continue to the end of its level period. Most carriers set a minimum conversion amount, so confirm it. This is the single most useful option for policies below the settlement threshold, and almost nobody is told about it.
Renew annually when the need is short and specific — a spouse reaching an age where a pension survivor benefit begins, a note being retired in two years, a health situation where the horizon is genuinely short.
Let it expire when the need is gone. That is a legitimate answer and not a failure. Before doing so, check for an accelerated death benefit rider, which attaches to many term contracts at no additional premium and can release part of the benefit on a qualifying terminal illness certification — no buyer, no ownership change, no transaction cost. See what is an accelerated death benefit rider.
The head-to-head comparison between converting for yourself and selling is in life settlement versus term conversion.
Illinois Rules, and Which State Governs Your Transaction
Two regulators with two different jobs. The insurer is regulated where it is domiciled: State Farm Life Insurance Company is an Illinois company supervised by the Illinois Department of Insurance, which handles solvency oversight, form approval, and consumer complaints about claims, lapse notices and servicing. That is the escalation path if a written request to the carrier goes unanswered — see Illinois insurance department consumer help.
A settlement transaction is regulated where the policy owner lives. Illinois governs these under the Illinois Viatical Settlements Act at 215 ILCS 158, covering provider and broker licensing, required disclosures before signature, and the rescission period after closing. Because State Farm writes nationwide, most of its policyholders will fall under a different state’s act, with different licensing standards, disclosure requirements and rescission windows. An overview is at life settlement licensing in Illinois.
Three habits regardless of the path you choose. Contact only your assigned agent or the number printed on your own statement. Verify any provider’s or broker’s license with your state insurance department before signing anything. And require every offer in writing, with the gross amount, every deduction including compensation, and the escrow agent identified.
Above all, keep paying premiums throughout. A lapse during underwriting destroys the asset and can end a conversion right permanently. Nothing is certain until closing documents are executed, the carrier processes the ownership change, and funds clear escrow.
Pine Lake Life Solutions does not purchase policies and is not licensed in every state. We read the specifications page, the conversion provision and the renewal schedule, tell you which routes are actually open, and say plainly when the honest answer is that partial conversion or a rider serves you better than any sale. The category overview is at can I sell a term life insurance policy. That review is free — send the cover page or call (305) 209-7183.
Frequently Asked Questions
Does State Farm Select Term renew after the level period?
Select Term has been structured with annual renewability after the level period, with renewals available to advanced ages, though terms vary by issue year and state. Ask your agent for the actual annually renewable premium schedule in writing rather than estimating it. Premiums rise modestly at first and then accelerate sharply, because they track mortality cost at attained age.
Can a buyer use renewal instead of conversion?
Sometimes. When the insured’s life expectancy is genuinely short, paying two or three years of high annually renewable premium can cost a buyer less than converting into a permanent policy and funding it. That means an annually renewable term policy can occasionally attract interest even after the conversion window closed, which is worth checking rather than assuming.
When does my conversion right end?
Usually earlier than the level premium period. Common cutoffs are an attained age such as 65 or 70, or a fixed policy year such as the tenth of a twenty-year term, with many forms applying whichever comes first. Ask your State Farm agent to confirm the deadline as a calendar date in writing, along with the permanent forms available for your form number.
Is a $100,000 term policy worth trying to sell?
Rarely. Most institutional buyers set a minimum around $100,000 of net death benefit and many will not open a file below $250,000, because record retrieval, life expectancy reports, legal review and escrow cost roughly the same regardless of policy size. On term the effective threshold is higher still, since the buyer also absorbs the premium step-up.
What is partial conversion and should I consider it?
It lets you convert only part of the face amount, subject to a carrier minimum. Converting $75,000 of a $300,000 policy costs roughly a quarter of a full conversion, produces permanent coverage that will actually pay, and leaves the remaining term running to the end of its level period. For policies below the settlement threshold it is usually the most valuable option available.
Should I stop paying while exploring a sale?
Never. A lapse during underwriting destroys the asset and can end a conversion right permanently. Nothing is certain until closing documents are executed, the carrier processes the ownership and beneficiary change, and funds clear escrow, after which a statutory rescission period still runs. If affordability is the pressure, call your agent during the grace period rather than after it.
Find out what your policy is worth — free, confidential, no obligation.
A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.
Related Reading
- Sell Term Life Policy
- Can I Sell A Term Life Insurance Policy
- What Is A Term Conversion Rider
- Life Settlement Vs Term Conversion
- What Is Guaranteed Universal Life
- Minimum Policy Size For A Life Settlement
- What Is An Accelerated Death Benefit Rider
- Life Settlement Licensing Illinois
- Illinois Insurance Department Consumer Help
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.