Replacing Life Insurance

So you’re considering the replacement of your life insurance policy. Before you get your heart set on a new one, there’s a few things you might want to think about. In fact if you were to read the “Life Insurance Buyer’s Guide” published by the National Association of Insurance Commissioners you would find multiple things to think about.

  1. At inception, the beginning of the new policy, some causes of death may not be covered for a period of time. It’s probably covered in the policy you have now.
  2. Make sure to check with your tax advisor and find out if dropping your policy will have an effect on your income taxes.
  3. The benefits of the new policy may not be as good as what you currently have. Make sure to read the fine print and ask all the questions you want. Make an informed decision if and when you replace life insurance.
  4. You have some amount of time to review your new policy called a “free look period”. Make sure you read the new one and it is what you wanted. Accept the new policy and cancel the old one. Make sure you understand non forfeiture values.
  5. In most cases a policy is not obsolete. Often a change of coverage or adding certain benefits you now require is all you really need.
  6. You might be stuck with what you have. You’re probably older, your health condition may have changed. The premiums may be higher than the old policy or maybe you can’t qualify for a new policy.
  7. Replacing a policy can cost more than it appears. Many policies are graded. This means you pay a higher premium for your youthful age while paying a lower premium for your age in the later years. Much of what you paid in the early years of the policy you have now paid for the company’s cost of selling and issuing the policy. You may pay this type of cost again if you buy a new policy.

In every single case you should check with the agent, the agency or even the company that wrote the policy you’re replacing. Depending on the type of policy you should have seen what’s called an illustration. Ask for an updated version as well as the original if you can’t find it. Check out the actual performance of the policy against the expected performance when you first bought it. This should give you an idea of what this particular policy will do in the future.

For More Information Try Reading:

Before You Buy Life Insurance

How Much Life Insurance Do I Buy

Replacing Life Insurance

Insurance Knowledge

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