4. Shop around
No matter how old you are, it's a good idea to periodically compare your life insurance policy to others on the market. "Every now and then the National Association of Insurance Commissioners changes the interest rates that are required to be used for guarantees in life insurance policies," says Udell. "It behooves you to shop your policy every five years, especially if you currently have cash value insurance. If you are in good enough health, you could get a cheaper policy."
Before making a switch, check the terms and conditions of your current policy. You'll probably have to pay surrender charges, and you might owe taxes after the transaction.
If you have a cash value policy, monitor its performance as you monitor the funds in your retirement accounts. "Get an 'in-force ledger' from your insurance company every single year to make sure the policy is performing the way that it was illustrated," says Udell. "Otherwise, if the policy earns a lower interest rate than was projected at the beginning, the cash value could run out, and you'd have to start over with a new policy."
An alternative option is to buy insurance that has a guaranteed payout, but the premiums would be higher.
If you want another policy, you might be able to exchange it for your old one tax-free. "There are some mechanisms in the tax code that allow you to exchange a life insurance policy for another or for an annuity, similar to a 1031 exchange in real estate. For life insurance, it's called a 1035 exchange," says Udell.
5. Look beyond employer insurance
The cheapest life insurance available may be the group insurance sponsored by your employer, but it shouldn't be your only source of coverage. "Employer insurance is clearly a benefit, but you don't want to depend exclusively on it. When you leave the company, you may not have the right to convert that group policy to an individual policy," says Udell. "You'll want to buy some term insurance of your own. Otherwise, you're basing your insurance program and the financial security of your family on this employer's plan."