Think twice before replacing that life
insurance policy
If you own a life insurance policy, think twice before replacing it. Why? In many
cases, you hurt yourself in the future.
Before you drop an in-force life insurance policy, consider the following factors:
If your health status has changed over the years, you may no longer be insurable at
standard rates.
Your present policy will usually have a lower premium than a new policy of the same
type just because you’ve grown older.
Even if both your present and proposed policies pay "dividends," you may wait
years before the new policy’s dividends equal those paid by your present policy.
If you replace one cash value policy with another, the cash value of the new policy may
be small for several years and may never be as large as the original policy.
You may have to wait one or two years before the new policy passes its
"contestable" period. During that time, the insurer may cancel the policy or
refuse to pay a claim if you made any mistakes or untrue statements on your application.
Before you say "yes" to a policy swap, look into your options and carefully
compare policy costs and features. Request detailed cost breakdowns about your present
policy and the potential replacement. Ask why you should switch to the new policy and why
you should retain your current policy.
If you do decide to surrender or reduce the value of your current policy, be sure:
- to insist that the agent making the proposal puts it in writing;
- that you pass any required medical examination; and
- that you wait until your new policy is in force before you cancel the old one.
Your independent insurance agent can answer specific questions about replacing your
life insurance policy.
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