What About the Policy You Have Now?
If you are thinking about dropping a life insurance policy, here are some things you should consider:
How Much Do You Need?
What Is the Right Kind of Life Insurance?
If you decide to replace your policy, don’t cancel your old policy until you have received the new one. You then have a minimum period to review your new policy and decide if it is what you wanted. It may be costly to replace a policy. Much of what you paid in the early years of the policy you have now, paid for the company’s cost of selling and issuing the policy. You may pay this type of cost again if you buy a new policy. Ask your tax advisor if dropping your policy could affect your income taxes.
If you are older or your health has changed, premiums for the new policy will often be higher. You will not be able to buy a new policy if you are not insurable.
You may have valuable rights and benefits in the policy you now have that are not in the new one.
If the policy you have now no longer meets your needs, you may not have to replace it. You might be able to change your policy or add to it to get the coverage or benefits you now want.
At least in the beginning, a policy may pay no benefits for some causes of death covered in the policy you have now.
In all cases, if you are thinking of buying a new policy, check with the agent or company that issued you the one you have now.
When you bought your old policy, you may have seen an illustration of the benefits of your policy. Before replacing your policy, ask your agent or company for an updated illustration. Check to see how the policy has performed and what you might expect in the future, based on the amounts the company is paying now.
Here are some questions to ask yourself:
How much of the family income do I provide? If I were to die early, how would my survivors, especially my children, get by? Does anyone else depend on me financially, such as a parent, grandparent, brother or sister? Do I have children for whom I’d like to set aside money to finish their education in the event of my death? How will my family pay final expenses and repay debts after my death? Do I have the family members or organizations to whom I would like to leave money? Will there be estate taxes to pay after my death? How will inflation affect future needs?
As you figure out what you have to meet these needs, count the life insurance you have now, including any group insurance where you work or veteran’s insurance. Don’t forget Social Security and pension plan survivor’s benefits. Add other assets you have: savings, investments, real estate and personal property. Which assets would your family sell or cash in to pay expenses after your death?
All policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. Your choice should be based on your needs and what you can afford.
There are two basic types of life insurance: term insurance and cash value insurance. Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.
Term Insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.Get a Free Quote
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