How to Replace an Existing Life Insurance Policy
Life insurance policyholders need to craft policies which benefit their families the most. Still, life can throw us curveballs. There are a few reasons someone might want to swap out their current life insurance plan. Sometimes, a different policy might have better coverage—and at a lower cost. Maybe your health needs, living situation or family situation has changed.
To get the most out of your policy, it’s a good idea to be consistent about its benefits. It’s also a good idea to consider replacing your current policy with a new one if you can find better benefits. Here’s how to replace your policy.
Step One: Know the Regulations
Every state has different life insurance replacement regulations. You can visit the National Association of Insurance Commissioners website to find your state’s rules. Sometimes, a state’s insurance code requires that certain prerequisites exist before a policyholder switches .
Step Two: Review Your Life Insurance Needs
It’s a good idea to get a life insurance policy review once per year. Maybe you’ve gotten married. Or, maybe you’ve purchased a home. Have recent health concerns popped up? Significant life events warrant a close look at your policy, because a new policy might fit your family’s needs better.
Step Three: Search by Policy Type
Once you’re browsing new policies, prioritize the type of life insurance you need. If your 10–year term life insurance policy isn’t cutting it, maybe you need whole life insurance instead. If you purchased your universal life insurance policy on a better-safe-than-sorry basis, maybe you need something smaller—like a 20-year term.
Step Four: Consider the Pricing Difference
According to the Financial Planning Association, assessing the price quality of your current plan is important. This is about seeing what coverage you get for your policy. Sometimes, a policy’s pricing remains excellent. In other cases, a policy’s replacement can trump pricing in and of itself.
Step Five: Figure Out the Policy’s Waiting Period
Your new policy might have a waiting period—which freezes certain benefits until the policy has aged several years. Before making a purchase, double-check these caveats.
It’s a good idea to review your future policy with your insurance agent, too. In general, a professional eye never fails to benefit the shopping process. Once you’ve picked out some winning policies, your agent can help you identify some lesser-noticed benefits to make your choice easier.