Is it Time to Review Your Existing Life Insurance Coverage?
Most people buy life insurance and simply never think about reviewing their coverage or needs again. The fact is that you should periodically review your existing life insurance coverage to make sure that it is meeting your objectives. The life insurance industry has changed and is continuing to change for the better. Life insurance rates have been on the decline, life insurance companies have become better at underwriting health impairments and life insurance products have evolved. If you own a life insurance policy, it might be a good time to review your coverage and coverage goals. Here are some things you need to think about when it’s time to review your existing life insurance coverage.
Has Your Health Changed?
Your health plays an important role in determining your premiums. If your health has improved since you originally purchased your coverage, it might make sense to ask your existing insurance company for a rate review or to get a new policy with a different company. If you ask for a rate review you will have to go through underwriting again, but it could be worth it.
What if your health has deteriorated since you purchased your policy? Maybe you developed a moderate or severe health issue. If your health has deteriorated, it might make sense to convert some or all of your term coverage to permanent coverage and lock in your health class rating. Most convertible term policies allow conversion to permanent products without proof of insurability. This means you won’t have to go through underwriting again and your new rates will be based off your original health rating.
Have You Stopped any Dangerous Hobbies/Jobs/Travel?
Applicants who engage in dangerous hobbies, jobs or travel to dangerous areas may have to pay a flat-extra for coverage. A flat-extra is simply an added premium per thousand of coverage. If you stopped engaging in any of these high risk activities, you could ask for your flat-extra to be removed. It could save you thousands.
Have You Quit Smoking or Using other Tobacco Products?
Rates for smokers are roughly 3x higher than rates for nonsmokers. If you’ve quit smoking for at least 1 year and it is documented in your medical records, you could qualify for ‘Standard’ nonsmoker rates. This would mean huge savings on your premiums.
Do You Have Enough Life Insurance Coverage?
There are certain situations that might require you to purchase additional life insurance coverage. Certain life changes that could require more life insurance include:
- You have added another child/children to the family
- You purchased a larger home with a larger mortgage
- You are earning larger paycheck that needs greater protection
- You are taking care of your parents financially
If you have experienced any of these events, you could need more coverage. It makes sense to recalculate your needs to see if you have enough coverage in force.
Have You Looked at an In Force Ledger on Your Permanent Coverage?
If you purchased universal life insurance, you were given an illustration when you purchased the policy. Universal life insurance doesn’t offer the same guarantees as whole life insurance, so it is important to get an in force illustration every few years to see how well your policy is performing. Certain factors like interest rates and cost of insurance could change, which could have a huge impact on how your policy performs over the long haul. It is important to ask your agent to request an in force ledger every few years to see where you stand. The goal is to make sure that the policy is performing close to what was illustrated. If your policy is underperforming, it could lapse at some point in the future even though you paid your premiums on schedule. In order to keep your coverage from lapsing, you would most likely have to increase your premiums.
Are Your Beneficiary Designations Up to Date?
Having the right beneficiary designations on your policy is very important. You want to make sure that your death benefit goes to the right person don’t you? Maybe you got divorced or maybe one of your beneficiaries has predeceased you. Many times people draft a family trust and forget to add it as a beneficiary on their life insurance policy. Periodically reviewing your beneficiaries will ensure that your death benefit will go to your intended beneficiaries.
Have Your Life Insurance Goals Changed?
As you get older, your goals for life insurance could change. When you’re younger, you might opt for less expensive term coverage since you have more financial obligations such as raising a family, paying off a mortgage and saving for retirement. When you get a little older and become a bit more financially secure, you might start thinking about purchasing some permanent coverage to pay for final expenses or to leave a bequest to loved ones. If your goals change, it could be a good idea to look at some options to add permanent coverage to your overall strategy.
Can You Lock in a Better Rate?
Several companies this year alone have lowered rates for term life insurance coverage. In fact, term life insurance rates have been on the decline for some time. If you purchased life insurance a few years back, chances are pretty good that you could get a better rate today. It doesn’t hurt to at least shop around and see if you can lock in a lower rate with a new policy.
Can You Find a Better Life Insurance Product?
Life insurance products have evolved over time. Even some term products today come with living benefit features that you can access if you develop chronic or critical illnesses during the life if your policy. Whether you currently own a term or permanent policy, it might make sense to look at your options to see if you can find a better product to meet your needs.
What to Consider Before Replacing Your Existing Coverage
It is important to understand that if you replace your existing policy with a new policy, your 2 year contestability period and suicide clause will reset.
- The 2 Year Contestability Period – If the insured dies within 2 years of taking out the policy, the life insurance company can deny to pay the death claim if it finds that the insured made any misrepresentations on the policy application.
- The Suicide Clause – In most cases, no death benefit will be paid if the insured dies of suicide within 2 years of purchasing a policy.
This shouldn’t really make a difference for most people, but it is something to consider.
Get a Complimentary Review of Your Existing Coverage
Reviewing your existing life insurance coverage at least every 2 years is very important. It could allow you an opportunity for greater savings and better coverage to meet your needs. If you would like to know if a better coverage option is available, we can help. We offer complimentary coverage reviews so that you can be assured you have the right coverage in place. If you are interested in a review of your existing coverage, please give us a call at (888) 687-9444 or email us at info@archstoneagency.com.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com.
