Published May 2, 2018|2 min read
Life insurance rates are at a 20-year low. That’s great news for people who need coverage, but if you already have a policy, you might feel like you shopped too soon.
You shouldn’t: Life insurance rates go up alongside age and any declines in health, so it’s not like you can just wait around for a sale. Locking in rates when you’re young and healthy is a smart move when you’re in the market for a policy.
Plus, you can still take advantage of low rates. If you skimped on coverage for the sake of affordable premiums or your needs have changed in recent years, it’s certainly a good time to buy more life insurance.
You’ll have to go through the application process, including the medical exam, again — most likely even when tapping your current carrier. But if you need more coverage, you need more coverage. You can learn more about your options for getting extra life insurance here.
It’s is possible to replace a current policy. However, there are a some important things to consider before pursuing a switch.
For starters, your specific rates are ultimately determined by how risky you are to insure (i.e. how likely you are to pass away while a policy is in effect). So, market trends aside, if you’ve aged a bit or developed a health condition since buying your current coverage, expect to see higher — not lower — premiums when shopping.
Second, replacing a policy resets your “contestability period”, the length of time (usually two years) during which an insurer can cancel your policy or refuse to pay its total benefit, should it find misrepresentations on your application.
You can learn more about the pros and cons of life insurance replacement here.
Of course, there’s no harm in shopping around — especially if you didn’t the first time you sought coverage. Comparison-shopping is the best way to save on a policy. (We can help you compare life insurance quotes across carriers here.) Here are a few more tips to if you’re mulling a replacement policy or looking to increase coverage:
Get a good estimate of how much life insurance you need. We recommend a “needs-based analysis” that adds up five major financial obligations — debt, childcare, college savings, income support and burial expenses — and considers your current savings. Remember to account for an existing policy if you plan on keeping it. Our life insurance calculator can help you get a solid estimate.
Tell the quoter everything. We get it's a little weird to tell a computer — or, later, a broker — your health details, but the life insurer is going to find out about any conditions, bad habits or risky hobbies during underwriting. If you want accurate quotes, be candid when answering preliminary questions.
Look into laddering. That's where you stack multiple term life insurance policies on top of each other and stagger their end dates. Laddering is a common strategy among families that need more life insurance as it allows them to reduce coverage over time, but still lock in low rates while young and healthy. You can learn more about laddering here.
Think twice if someone aggressively pushes replacement coverage. Most agents are looking out for your best interests, but beware of any bad actors trying to churn policies. Churning, which is illegal, occurs when an agent sells or replaces a policy solely for the commission. It's the reason why you're usually asked to disclose if you're shopping for a life insurance replacement when you request quotes.
Don't cancel an old life insurance policy until the new one is official. Lest something go awry at the end of the underwriting and you wind up with zero-coverage.
Confused about how life insurance works? We got you covered. Here are the answers to 20 questions about life insurance you're too embarrassed to ask.
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