Life is always changing, and your life insurance coverage should keep up. Whether you've recently welcomed a child, taken on a new mortgage, or simply want to ensure your loved ones are fully protected, increasing your life insurance coverage can offer added financial peace of mind. But before you adjust your policy, it’s important to understand why you might need to do so and how to go about changing your coverage amount.
Reasons You Might Need More Life Insurance Coverage
Life insurance isn’t a one-size-fits-all product. Over time, the coverage amount you originally purchased may no longer be enough. Here are common life changes that could signal it’s time to revisit your policy:
A Growing Family: If you’ve recently had a child or added new dependents, you’ll likely need more coverage to ensure their future expenses (like college or childcare) are fully accounted for.
New Mortgage or Debt: Buying a home or taking on other large debts means your loved ones could be left with financial burdens if you’re not adequately insured.
Increased Income or Lifestyle: As your earnings and lifestyle rise, your family’s financial needs may grow, too. More coverage can help maintain that standard of living.
Business Obligations: If you’ve become a business owner or taken on a partnership, life insurance can be used to cover buy-sell agreements or protect your business continuity.
Planning for Estate Taxes: Larger estates may be subject to significant taxes. Life insurance can provide liquidity to help cover those costs.
Loss of Group Coverage: If you’ve left a job that offered life insurance benefits, you may need to supplement or replace that lost protection.
What to Know Before You Increase Coverage
Increasing your life insurance coverage isn’t as simple as adjusting a number—it comes with potential changes and requirements. Here are some key things to keep in mind:
Higher Premiums: More coverage typically means higher monthly or annual premiums.
New Underwriting: You may need to undergo a new medical exam or health questionnaire, especially if you’re increasing coverage significantly.
Age and Health Factors: Your current health and age can affect the cost and availability of additional coverage.
Policy Type Restrictions: Not all policies allow for easy adjustments. Term and whole life policies have different rules.
Loss of Original Terms: Modifying a policy could mean losing certain favorable terms or guarantees from your original agreement.
What about increasing term life insurance?
If you have a term life insurance policy, you might wonder whether it’s possible to increase your existing coverage amount. It’s important to distinguish between the two different approaches:
Manually Increasing Coverage: Some term life policies allow you to apply for a coverage increase, but this usually involves new underwriting and adjusted premiums.
Term Policies with Scheduled Increases: Certain term products offer pre-scheduled coverage increases at set intervals. These typically come with corresponding premium increases and are designed for people who expect their insurance needs to grow over time. This option must be selected at the time of purchase.
Alternatives to Increase Your Life Insurance Coverage
If increasing your current policy isn’t the right decision for your needs, consider these other strategies:
Buy a New Standalone Policy: This can be especially helpful if your current policy is near its limits or doesn’t offer favorable terms for increasing coverage.
Layering Policies: Also known as laddering, this involves purchasing multiple term policies with different lengths and coverage amounts to match changing needs over time.
Supplement with Permanent Life Insurance: Adding a permanent life insurance policy can offer lifelong coverage plus potential cash value accumulation.
Consider Riders: Some insurers offer riders (policy add-ons) that can enhance your existing coverage or provide additional benefits like accelerated death benefits or long-term care coverage.
SelectQuote Can Help You Navigate Your Coverage Needs
Whether you're planning for the future or responding to recent life changes, reviewing and possibly increasing your life insurance coverage is a smart financial move. At SelectQuote, we have over 40 years of experience helping families make decisions about life insurance. Our licensed insurance agents can help you evaluate your current needs, understand your policy options, and explore policies to ensure your loved ones remain protected, no matter what the future holds.
