How to increase your life insurance coverage

The circumstances in your life can change — and the amount of life insurance coverage you need may change with it. Read on to find out how to increase your life insurance coverage.

Nupur Gambhir

Nupur Gambhir

Published December 18, 2019

KEY TAKEAWAYS

  • The first step in increasing your life insurance policy’s death benefit is to determine how much more coverage you need, which is influenced by debt, dependents, and foreseeable costs.

  • Increasing the coverage amount on a term life insurance policy requires going through the underwriting process again, including a medical exam and an evaluation from the underwriter.

  • Whole life insurance policies have a flexible death benefit, though this comes at a cost of higher premium payments.

When you purchase life insurance, you’re ensuring that your dependents won’t suffer financially in the event of your death. The life insurance coverage you buy is called the death benefit and is paid out by your insurer to your beneficiaries when you pass away.

Maybe you bought your life insurance policy when you were young and didn’t have as many financial commitments, or maybe your family is getting bigger! Whatever the reason is, if you need to increase the amount of life insurance you have, you have a few options to make sure that you have the proper coverage in place.

In this article:

Figure out how much life insurance coverage you need

Before you begin the process of increasing your life insurance coverage, you need to decide how much total coverage you actually need so that you aren’t paying for too much life insurance.

For adequate coverage, the average person should have between 10-15 times their income in life insurance coverage. The Policygenius life insurance coverage calculator can help you determine exactly how much life insurance you need depending on your specific circumstances.

These additional factors also largely determine how much coverage you should have:

  • Outstanding debt
  • Future costs of college tuition
  • Dependents, such as children or elderly parents
  • End of life expenses
  • Financial cushion

The more expenses that you leave behind when you die, the more life insurance coverage you will need to ensure that those costs don’t fall upon loved ones.

Increase your term life insurance coverage

If you want to increase life insurance coverage on your term policy, unfortunately, you usually can’t just ask for an increase in the death benefit and start paying the new premiums. While some term policies do offer an extension benefit, this varies across carriers. A Policygenius representative can help you determine which carriers might have this option available for you.

For most term life insurance policies, you’ll need to talk to your insurer about making any adjustments to the death benefit amount and going through the underwriting process again, including the medical exam. Lab results often remain valid for between 6-12 months, so if you realize within the first year of your policy that you’d like to add more coverage, you may be able to skip re-taking the medical exam.

The underwriting process to increase your death benefit will include the following steps:

  • The medical exam— Essentially a physical, the medical exam will verify the information you provided, such as height and weight, and evaluate your health. The medical practitioner will be looking for conditions such as high blood pressure, elevated cholesterol, and diabetes. The healthier you are, the better life insurance classification you will receive
  • The attending physician’s statement (APS)— An attending physician’s statement informs the underwriter of any prescriptions you are taking and your complete health history. With a more holistic view of your health, a classification determination can be made
  • Final approval— After collecting all your application data, the underwriter will analyze the information to approve (or reject) your request to increase your coverage amount.

Depending on the age at which you ask for an increase in life insurance coverage, the insurer may ask for additional information beyond the basic underwriting requirements, such as detailed medical records.

Purchase a new life insurance policy

You can add extra life insurance coverage by applying for a new policy that will better suit your needs. You can either maintain both policies or cancel your original policy and put all your life insurance coverage into the new policy.

Applying for a new life insurance policy will involve going through the underwriting process again, which may result in higher premium rates due to health and age. For this reason, maintaining your current policy and utilizing the new policy for only the additional coverage that you need is likely the most cost-efficient way to maintain multiple life insurance plans.

If you choose to purchase a new life insurance policy and your current policy is about to expire, you’ll want to begin the application process at least six months in advance to avoid a coverage gap. The sooner you begin the application process, the more prepared you will be for any curveballs, such as the rejection of your life insurance application. If your policy gets rejected or you simply don’t want to go through the underwriting process again, you can see if your current term policy has an option to convert into a permanent life insurance policy.

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Convert your term policy to a permanent life insurance policy

Most term life insurance policies come with a built-in rider called the term conversion rider, which allows you to convert your term life policy to a permanent life policy when the term expires.

By converting your term policy to a permanent policy, you won’t have to go through the underwriting process again to retain coverage. Though there are a few specific circumstances that may require additional underwriting, including:

  • You want to increase your benefit amount
  • You have a simplified issue term policy, which means that you did not originally go through the entire underwriting process to get life insurance.
  • You want to add additional riders to the policy
  • Your health has drastically changed since your original policy began.

As with purchasing a new policy, you’ll want to begin the process of converting your term policy to a permanent policy at least six months in advance of your policy’s expiration date to ensure that the rider is available to you. Not all policies include them, and if the rider isn’t an option you’ll want to make sure that you can pursue coverage options elsewhere.

Enroll in your employer-sponsored life insurance policy

Depending on how much additional life insurance coverage you need, an employer-sponsored life insurance policy might be a good supplement to your current policy. Employer-sponsored life insurance, or group life insurance, usually doesn’t provide enough coverage on its own, but can be beneficial if you only need to increase your life insurance coverage by a small amount.

The benefit of group life insurance is that the application process is less intensive than purchasing an individual plan and it’s paid for by your employer. It’s usually guaranteed issue, meaning you won’t have to go through the underwriting process, and there are few hurdles for your beneficiaries to get the benefit.

On the downside, if you leave your job, you’ll lose your group life insurance policy and any additional coverage it was providing. To retain the supplemental coverage, you would either need to purchase a new life insurance policy or enroll in a group life insurance policy through your new employer.

Life insurance policies with an adjustable death benefit

If you’re still shopping for a life insurance policy and anticipate that your coverage needs might change, you can choose a type of policy that allows for changes in the death benefit. While term policies tend to be the best life insurance option for most people, you won’t be able to get additional coverage without going through the underwriting process again. A whole life insurance policy that has a cash value accumulation option, on the other hand, can see an increase in the death benefit without additional underwriting while the policy is in force. However, whole life insurance is more expensive and 45% of whole life policies are surrendered within the first ten years.

The death benefit of a whole life policy can grow through dividends that are paid to the policyholder, which can go toward adding an additional death benefit to your policy. Growing the death benefit with dividends is dependent on interest rates, so an increase in the death benefit is often out of your control.

Adjustable life insurance

Adjustable life insurance is type of whole insurance that allows you to make changes in the death benefit. While a large increase in coverage may require you go through the underwriting process again, you won’t have to purchase an entirely new policy. Other changes that can be made to an adjustable life insurance policy include changes to premium payments and cash value.

An adjustable life insurance policy’s flexibility comes with a cost — it is about 6-10 times more expensive than term life insurance policy, where the death benefit cannot be adjusted. The graph below shows the average adjustable life insurance rates for a male with a Preferred (nonsmoker) classification, for $100,000 in coverage and no optional riders.

AGESMONTHLYYEARLY
20$36.19$434.38
30$42.00$504.00
40$62.74$752.93
50$89.50$1,074.09

Cancel your life insurance policy

Depending on how you choose to increase your life insurance coverage, you may need to cancel your current policy.

There are two ways to do this:

  • Discontinue premium payments— Outside of the grace period determined by your insurer, if you stop making your life insurance premium payments, your policy will be canceled by the insurer. No additional steps are necessary.
  • Write a letter— You can cancel your policy by giving your insurance company written notice. You will want to include your policy’s effective date, policy date, your address, and a request for any unused premiums to be sent back to you. Depending on the insurer, you may also be able to cancel over the phone or through an online form.

Once you cancel your policy, the death benefit will not be paid out to your beneficiaries if you die. Before discontinuing premium payments or informing of the insurer that you’d like to cancel the policy, you’ll want to ensure you have alternative coverage options in place.