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Life is priceless, but you might be able to contain
the cost of insuring it.
If your current term life insurance coverage is years
old or your lifestyle has changed, it's probably time to "refinance"
your policy. Periodic examinations of your insurance in the same
way you explore more cost-efficient ways to pay for your car or
house could save you big bucks.
Byron Udell, founder and CEO of AccuQuote.com,
says the cost to insure your life dropped 60 percent from 1994 to
2004. Why the decrease? A big reason is that we're living longer
and insurance companies are rewarding us for that increased longevity.
Plus, competition has also increased
for your life insurance business. "There are a lot more choices
today," Udell says.
If that's not enough to convince you to re-examine
your life insurance policy, then consider how your life has changed
over the years. If your three children have all graduated from college,
for example, you no longer need to worry about that expense so you
may want to trade down for a less expensive coverage.
A different lifestyle also could affect your coverage
concerns. If you've quit smoking or lost 50 pounds (or both), you'll
be eligible for less-expensive insurance since you're healthier
than you were under your old policy.
Even if you're happy with your current policy, most
insurance experts agree that if it's been a while since you looked
at your coverage, it's time to do so again.
"You can get more features, longer premium guarantees
and better conversion options on a policy than five years ago,"
says M. Bryan Freeman, president of Habersham Funding LLC, a life
settlement provider company based in Atlanta. "You can literally
go to the market and buy insurance that as cheap or cheaper as your
old policy even though you are older and your new policy will have
better features."
Research variables
Insurance professionals urge consumers to reassess their term life
policies every couple of years, pointing out that the research is
easy to perform and you stand to lose nothing for looking into your
coverage. You can use one of the insurance quote Web sites, ask
your current life insurance agent to scout around for deals or combine
the two methods to ensure you get the best deal.
If you are happy with your current agent, a good starting
point is to ask him or her what your current life insurer can do
to supplement your existing coverage or otherwise tweak it to better
fit your needs and lower costs.
A check of the many insurance Web sites will give
you an idea of the variety of coverage out there. But keep in mind
that Web sites might paint a rosier policy picture since they're
basing your coverage on fewer variables; an online search depends
on what you type in on a typically short form. The searches also
don't ask for as in-depth information as you eventually will have
to provide before you sign on the new policy's dotted line. So after
getting some policy ideas from the Internet, double-check them with
an insurance agent before committing to a particular coverage.
Another good reason to get personalized help: An agent
who represents a lot of different companies and is knowledgeable
about what their policies have to offer can give you more details
that fit your individual situation.
"My best piece of advice is to deal with a broker
who has a large menu and not just one that says they do, says AccuQuote's
Udell."You want a broker who writes a boat load of business,
20 to 50 policies a year."
Careful comparisons
Be sure to compare apples to apples, says David Berdow, an insurance
agent with John Hancock Financial Services in Conshohocken, Pa.
That's true for the amount of coverage, length of term and all fees
associated with the policy.
Even if you decide to stay with your current insurer,
your research might have indicated that you need to rethink the
amount of coverage you have.
"Most statistics show that Americans don't have
enough, so it's a good time to increase your coverage," says
Nancy Behrens, vice president life risk management at State Farm
Life Insurance, Bloomington, Ill. "Most studies talk in terms
of coverage that is seven to 10 times your income."
Re-examination of your coverage is also a good time
to update your policy's beneficiaries.
And you should never give up one policy until you
have a new one in force, recommends David F. Woods, president of
the Life and Health Insurance Foundation for Education in Washington,
D.C.
When it finally comes time to make the actual policy
purchase, some people prefer to have an agent walk them through
the process while others are just as happy to fill out a form on
a web site and get nearly instant comparisons of different life
insurance policies. Regardless, the cost for a policy is virtually
the same whether you buy it online or from an agent, according to
Berdow.
Of course, there are some caveats to insurance refinancing.
If your health has taken a turn for the worse -- you've been recently
diagnosed with a chronic or fatal illness -- you won't want to change
policies since your rates will increase.
Insurers also have a two-year contestability period
for new policies. "That gives them the right to challenge a
death claim," explains Berdow.
But as long as you do your research, recognize the
downsides of any changes and honestly evaluate your coverage needs,
refinancing your life insurance could work to your financial advantage
in much the same way as refinancing your car or mortgage.
Jenny C. McCune
is a contributing editor based in Montana.
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