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Switching your life insurance

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Life insurance coverage allows policyholders to take care of their loved ones financially after they pass away. Just as home and auto insurance provide peace of mind, life insurance allows policyholders to rest knowing that their beneficiaries will be more financially secure after their death. At times, life insurance policyholders may be interested in switching to a new insurance provider, potentially for a different type of policy or coverage amount.

You should follow a few steps if you want to switch your life insurance to another carrier. But before you do that, it may benefit you to talk to a customer service representative at your current life insurance company or your insurance agent to see if changes to your existing policy can make it work better for you. For example, some term life insurance policies allow you to switch to a permanent policy, such as whole life, as long as you do so before your current policy’s prescribed deadline. Below, Bankrate’s insurance editorial team lays out how to switch your life insurance, what to look for in a new policy and how to decide how much coverage you’ll need.

Reasons to switch life insurance policies

If you’ve already got a good policy, why would you want to switch life insurance companies or the type of policy you have? There could be any number of reasons, including the following:

  • Your needs have changed. Perhaps your children have grown and no longer need support, you’ve gotten divorced or your current level of coverage is no longer necessary.
  • You’ve decided to switch from a term policy to whole life insurance to obtain permanent coverage — or, conversely, you’d like to cancel your whole life policy for the simplicity of term.
  • You’ve reached the end of the term policy but still need coverage of some type.
  • You can no longer afford the premium payments.
  • You’ve discovered that your beneficiaries will have more (or less) financial need than you thought, and you’d like to change your death benefit amount.
  • You want to incorporate a cash value policy in your comprehensive financial plans.

Whatever the reason, you might find that your previous plan isn’t what you want.

How to switch your life insurance

Switching your insurance may seem daunting, but you can complete the process relatively simply. For maximum ease, you may want to consult the following steps:

  • Choose the type of life insurance you want. The first step is to choose if you want term or permanent life insurance. Term insurance lasts for a certain period and may require a medical exam. These policies are cheaper than permanent life insurance but will become more expensive to buy as you get older. Permanent life insurance, such as whole, universal and variable life insurance products, may cost more but do not expire under most circumstances as long as you pay your premium. These policies can have additional benefits, such as a cash value account that accrues throughout the life of the policy. If you are unsure which type of life insurance policy is right for you, consider speaking with a financial advisor or licensed insurance agent.
  • Determine how much coverage you need. After you determine the type of policy to buy, you’ll need to decide how much coverage you want. Consider what you want the death benefit payout to cover and how you’d like your beneficiary to use it. Are you looking to replace your income for your spouse, leave an inheritance for your children or just provide for burial expenses? Do you have debts that you want to make sure are paid if you pass away? The death benefit amount you choose will depend on what you want it to be used for and how much you can afford to purchase. Again, speaking with a financial advisor or insurance agent could help you determine how much life insurance coverage is right for you.
  • See if you can adjust your policy instead. After you know what changes you want to make, you can talk to your current insurer or agent to see if your policy includes terms that allow you to make changes to it to make it work for your new needs. It might not be an option, but it doesn’t hurt to ask. Also, depending on the type of changes you’d like to make, you may be able to avoid a health questionnaire or a medical exam, which is not as likely if you switch to a new insurer.
  • Apply for your new policy, if applicable. If you weren’t able to make changes to your existing policy and have decided to get a new one, you’ll have to apply through an insurance agent or online directly through an insurer. While many life insurance companies allow you to start a policy quote online, it’s likely you’ll have to work with an agent to complete the process. Depending on the type of policy, you may be required to undergo a medical exam. If a medical exam is not required, keep in mind that your premiums will likely be higher to account for the increased risk to the life insurance company. There will probably be a waiting period before you are notified of your insurer’s acceptance of your application, especially if you are switching companies.
  • Make sure your policy is active. Insurance experts recommend purchasing your new policy and making sure it is active before canceling your old policy. You likely don’t want a gap in coverage. There may be a waiting period before your new policy will pay out on some claims, and there is generally a two-year contestability period when your insurer can deny or contest claims. You may want to check on this information before you switch over.

Talking with a licensed insurance agent as you go along can help you to make sure you’re getting what you want out of the switch. Reviewing your current policy with your insurer or agent may also be advisable.

Things to consider when switching life insurance

When you switch your policy, there are a few tips to keep in mind:

  • Look at upfront fees. You may have fees to pay upfront when you purchase a new policy. If your motivation is saving money, be sure the money you save on a new policy will be worth paying these upfront costs once again.
  • Pay attention to taxes. Consider the tax consequences of dropping your old policy before committing to a new one. If you’re not sure what these might be, consult a financial expert or tax accountant.
  • Know that prices may increase. Premiums on your new policy may be higher, or you may not be insurable under the same conditions, based on your age or changes to your health.
  • Compare benefits. Be sure to compare your rights and benefits under your new policy against the old one; they may not be the same.
  • Consider changing the policy first. You may be able to save time and money by amending or adding to your current policy instead of replacing it. In order to keep you as a policyholder, your insurer may be willing to make adjustments to your policy—such as switching it from term to permanent.
  • Note the waiting period. Most new policies have a waiting period before certain kinds of death benefits become effective. Consider this before replacing your old policy.
  • Talk to your current provider. If you’re on the fence about replacing your old policy, ask your insurance agent or company what options you may have.

By doing these things, you may be able to avoid mistakes that could cause you to pay more money over time.

Tips for purchasing the right amount of coverage

If you’re considering switching your life insurance and wondering how much life insurance to purchase, the following considerations may be helpful.

  • Consider the things that you would like your beneficiaries to be able to pay for in your absence. Do you want your death benefit to be able to pay for your children’s education, for example, or to allow your spouse to live as he or she is accustomed to? Bankrate’s life insurance calculator might help with this step.
  • Consider the monthly premium you can afford. A higher death benefit amount means higher premiums, so taking your budget into account is an important step. Talking with a financial advisor, certified financial planner or insurance agent could help you decide what premium works best for you.
  • Consider your overall financial plans. For example, you may want to consider a policy that has a long-term care benefit that could be used if you need to pay for assisted living or a nursing home while you are still alive.
  • Don’t forget to take debt into account. If you have a spouse and young children, for example, it might not be enough to leave them money for education and living expenses. You’ll also want to consider any debts you may have that your estate might be responsible for if you pass away.

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Written by
Mary Van Keuren
Insurance Contributor
Mary Van Keuren has written for insurance domains such as Bankrate, Coverage.com, and The Simple Dollar for the past five years, specializing in home and auto insurance. She has also written extensively for consumer websites including Reviews.com and Slumber Yard. Prior to that, she worked as a writer in academia for several decades.
Edited by
Insurance Editor
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Director of corporate communications, Insurance Information Institute