Switching your life insurance

Life insurance allows policyholders to financially provide for their loved ones after they die. Life insurance, like home and auto insurance, provides policyholders with peace of mind by ensuring that their beneficiaries will be more financially secure after their death. Life insurance policyholders may want to switch to a new insurance provider at times, possibly for a different type of policy or coverage amount.

If you want to change your life insurance carrier, you must take a few steps. However, before you do so, you should speak with 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 the expiration date of your current policy. StrongInsurance editorial team explains how to switch your life insurance, what to look for in a new policy, and how to determine how much coverage you'll need in the sections below.

Reasons to switch life insurance policies

Why would you want to change life insurance companies or the type of policy you have if you already have a good one? There could be a variety of causes, including the following:

Your requirements have shifted. Perhaps your children have grown and no longer require your assistance, you've divorced, or your current level of coverage is no longer required.
You've decided to switch from a term policy to whole life insurance in order to obtain permanent coverage — or, conversely, you'd like to cancel your whole life policy in order to simplify things with a term policy.
You've reached the end of your term policy but still require coverage.
You are no longer able to make the premium payments.
You've discovered that your beneficiaries will have more (or less) financial need than you anticipated, and you'd like to adjust the amount of your death benefit.
You want to include a cash value policy in your long-term financial plans.

Whatever the reason, you may discover that your previous plan is no longer appropriate.

How to switch your life insurance

Switching your insurance may appear daunting, but it is a relatively simple process. You may want to consult the following steps for maximum convenience:

Select the type of life insurance that you require. The initial step is to decide whether you want term or permanent life insurance. Term insurance is only valid for a set period of time and may necessitate a medical exam. These policies are less expensive than permanent life insurance, but they will become more expensive as you get older. Permanent life insurance, such as whole, universal, and variable life insurance, may be more expensive, but it will not expire as long as you pay your premium. These policies may include additional benefits, such as a cash value account that grows over the policy's life. If you're not sure which type of life insurance policy is best for you, talk to a financial advisor or a licensed insurance agent.
Determine how much protection you require. After deciding on the type of policy to purchase, you must decide how much coverage you require. Consider what the death benefit payout should cover and how your beneficiary should use it. Are you looking to replace your spouse's income, leave an inheritance to your children, or simply cover funeral expenses? Do you want to ensure that your debts are paid if you die? The amount of the death benefit you select will be determined by what you intend to use it for and how much you can afford to purchase. Again, consulting with a financial advisor or insurance agent can assist you in determining how much life insurance coverage is appropriate for you.
Instead, see if you can change your policy. After you've decided what changes you want to make, check with your current insurer or agent to see if your policy includes terms that allow you to modify it to meet your new needs. It may not be an option, but it never hurts to ask. Furthermore, depending on the type of changes you want to make, you may be able to avoid a health questionnaire or a medical exam, which is less likely if you switch insurers.
If applicable, apply for your new policy. If you were unable to make changes to your current policy and have decided to obtain a new one, you must apply through an insurance agent or directly through an insurer online. While many life insurance companies allow you to start a policy quote online, you'll almost certainly need to work with an agent to finish the process. You may be required to take a medical exam depending on the type of policy. If a medical exam is not required, your premiums will most likely be higher to account for the increased risk to the life insurance company. There will almost certainly be a delay before you are notified of your insurer's acceptance of your application, especially if you are switching companies.
Check that your policy is active. Before canceling your old policy, insurance experts recommend purchasing a new one and making sure it is active. You most likely do not want a coverage gap. Some claims may be subject to a waiting period before your new policy will pay out, and there is typically a two-year contestability period during which your insurer can deny or contest claims. You may want to double-check this information before making the switch.

Talking with a licensed insurance agent along the way can help you ensure you get what you want out of the switch. It's also a good idea to go over your current policy with your insurer or agent.

Things to consider when switching life insurance

There are a few things to keep in mind when switching policies:

Consider the upfront costs. When you buy a new policy, you may have to pay some fees up front. If you want to save money, make sure the money you save on a new policy is worth paying these upfront costs again.
Pay attention to taxes. Before committing to a new policy, consider the tax implications of canceling your old one. Consult a financial expert or a tax accountant if you are unsure what these are.
Be aware that prices may rise. Because of your age or changes in your health, your premiums on your new policy may be higher, or you may not be insurable under the same conditions.
Compare benefits. Compare your rights and benefits under your new policy to those under your old one; they may not be the same.
First, consider changing the policy. Instead of replacing your current policy, you may be able to save time and money by amending or adding to it. In order to keep you as a policyholder, your insurer may be willing to make policy changes, such as changing it from term to permanent.
Take note of the waiting period. Most new policies impose a waiting period before certain types of death benefits kick in. Before you replace your old policy, think about this.
Speak with your current service provider. If you're on the fence about replacing your old policy, speak with your insurance agent or company about your options.

By doing these things, you may be able to avoid mistakes that could cost you more money in the long run.

Tips for purchasing the right amount of coverage

If you're thinking about switching your life insurance and wondering how much life insurance to buy, the following factors may be useful.

Consider what you want 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, or to allow your spouse to live his or her normal life? This step may be aided by a Strong life insurance calculator.
Consider how much of a monthly premium you can afford. A higher death benefit amount means higher premiums, so considering your budget is critical. Speaking with a financial advisor, certified financial planner, or insurance agent may assist you in determining the best premium for you.
Consider your long-term financial goals. Consider a policy with a long-term care benefit, which 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, leaving them money for education and living expenses may not be enough. You should also consider any debts you may have that your estate may be responsible for if you die.