Life Insurance: When to Change or Replace Your Policy

There are several reasons for changing or replacing your current life insurance policy with new coverage. Some of these may include:

• A new policy may provide you greater coverage or a higher death benefit at a similar or even lower cost than you’re now paying.
• You may have more confidence in a different agent or company than you originally selected.
• Your life insurance needs may have changed as a result of life changes you’ve experienced since your current policy was obtained.

Going From Temporary to Permanent Coverage

One of the more common reasons given for replacing a life insurance policy applies to those individuals currently covered by a temporary term life policy. You may now have elected to convert to a permanent form of coverage, such as whole life. Often, a term life policy is taken out to protect a young family because of the combination of a high death benefit and affordable cost. Once a family’s financial circumstances have improved, however, a permanent form of life insurance may be desired because of the benefits provided that are not available through term life. These include lifetime coverage at a level premium amount (regardless of changing health conditions) and an accumulating cash value.

Many term life insurance policies can be easily converted to some form of permanent coverage, such as whole life or universal life, and there are several good reasons you may choose to do so. Failing health conditions that may prevent you from qualifying for a new term policy when your current term coverage expires is a big one. When converting your term policy to permanent insurance, you won’t be required to undergo a health exam as long as you convert before the stated conversion deadline and you haven’t yet reached the age of 75.

Life’s Big Moments

It’s recommended that you review your insurance policies annually to revisit the coverage you have in force and compare this with your current insurance needs. If, however, you experience one of life’s big moments, such as getting married (or divorced), having a new baby (or grand baby), buying a new home or coming into a large inheritance, your insurance needs will almost surely change. In that case, you should consult your trusted insurance broker or financial advisor to help determine what alterations, if any, should be considered. Often, your current policy, with some slight upgrades, will prove sufficient and brand-new coverage won’t be required.