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Should I change my life insurance policy?
There are a variety of reasons why you might consider changing your life insurance policy. This could include wanting more affordable coverage, needing to add a beneficiary, experiencing a life change like purchasing a home and more. In this article, we’ll walk you through common situations where changing your life insurance policy makes sense.
Reasons to Change Your Life Insurance Policy
When you purchase a life insurance policy, it’s reasonable to anticipate that you’ll have to make changes to it sometime in the future. Life happens, and it’s not uncommon for individuals to consider changing or even switching their life insurance policy. Some of the main reasons you might be thinking about making changes to your life insurance policy include:
Big Life Changes
Experiencing a big life change is one of the most common reasons people adjust their life insurance policy. These changes could include getting married, having children, buying a house, paying off a mortgage, sending children off to college or preparing for retirement. In these situations, you may need to adjust your coverage.
Needing to Change or Add a Beneficiary
Removing or adding a beneficiary doesn’t normally require you to switch your life insurance policy. However, if you have a significant increase in the number of beneficiaries you want covered, you may need to reconsider your coverage amount.
Finding Out There Might Be a Better Policy Type For You
Just because you originally purchased a certain type of policy doesn’t mean that policy will always be the best fit. Whether you have term life insurance and would prefer the cash value option of a whole life insurance policy, or you have whole life insurance that is too expensive for your needs, both are reasons to consider switching policies.
Finding a More Affordable Policy or More Coverage
There’s no harm in shopping around to see if you can get a more affordable rate for your life insurance policy. If your life circumstances have changed (for example, if your health has improved, you’ve lost weight or you’ve quit smoking), then you may be able to find similar coverage for a better rate. You can also look at options for increasing your coverage while staying close to your current budget.
Change in Finances
A change in your financial situation should always prompt you to consider if any adjustments need to be made to your life insurance policy. This could include a promotion, buying a house, getting married or expanding your family.
Interested in Cash Value or Borrowing From Your Life Insurance Policy
If you have term life insurance, your policy will not accumulate a cash value and therefore will not allow you to borrow from the policy. A main benefit of permanent life insurance policies is the cash value that accrues at a specified rate each time you pay your premium. If you’d prefer a policy with a cash value component, it makes sense to switch from a term to permanent policy to a permanent life policy.
Employer-Provided Life insurance Isn’t Providing Enough Coverage
Life insurance through your employer can be a convenient option for affordable life insurance, but coverage is often limited. You’ll also only be covered for the time you’re at the company, so you may want to consider purchasing your own policy to guarantee coverage even if you switch jobs.
As the policyholder, you’re in control of your life insurance choices, but there are a number of factors to consider before changing your life insurance policy.
Tips You Should Know Before Changing Life Insurance Policies
There are a few things you need to consider before changing your life insurance policy:
- Medical exam: You may have to take another medical exam, and your results may cause higher premiums. Additionally, life insurance is more expensive as you get older.
- Cost: You’ll want to consider the cost involved while changing your policy.
- Contestability period: The incontestability clause is standard among life insurance policies, and it means that the death benefit may be denied or contested in the first two years of your new policy. This clause no longer applies if your current policy is more than two years old. Switching to a new policy will trigger a new contestability period.
- Tax implications: You’ll want to consider the tax advantages or consequences from both your current policy and potential new policy.
Before you switch your life insurance policy, you should check with your carrier and see if there’s a way to adjust your existing policy. This could help prevent upfront fees, tax consequences and a potential waiting period. Depending on benefits and coverage, the price of a new life insurance policy could also be more expensive. These are all factors to take into consideration before you decide if changing your life insurance policy is right for you.
If you’re unsure where to start, our life insurance calculator can help you determine the right amount of coverage for you.
How can I switch my life insurance policy?
Reviewing your life insurance policy annually will help you determine what changes, if any, need to be made to your policy. When you’re ready to switch your policy, the process consists of:
- Determining the type of policy you want and how much coverage you need
- Purchasing your new life insurance policy
- Canceling your existing life insurance policy
Whether you’re trying to adjust an existing policy, looking for new coverage or are interested in learning more about converting term life insurance to whole life insurance, we can help.
Can I switch life insurance companies?
It’s possible to switch life insurance companies, but it’s important that you buy your new life insurance policy before you cancel your current one. You’ll want to work with a licensed insurance agent to make sure the process goes smoothly and to avoid any gaps in coverage.
If you’re interested in looking at other life insurance companies, SelectQuote can help. We can shop several of the most trusted insurance companies to find the best rates and coverage for you.
Is it time to change your life insurance policy? Let SelectQuote help you make the right decision.
Considering all your life insurance options can be overwhelming, but we’re here to help make it easier. At SelectQuote, we can help you review your policy to make sure you’re still getting the right coverage for your needs. If you decide to change or update your policy, we can help you compare plans and carriers to find the best fit for your situation and budget.
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