There can be many reasons why you may be considering terminating or replacing your life insurance policy. Before you do, here are a few things that you should consider:
If you decide to replace your life insurance policy, don't cancel the old one until you have received and accepted your new policy
Most people are unaware that you're allowed a “free look” provision, which is a period of time immediately following the issuance of a life insurance policy, during which you may terminate your policy with a full refund. The free look period differs depending on the terms of your life insurance contract or the laws in your state, but is typically between 10 and 30 days. So if during this time you change your mind about your new policy, you can terminate it knowing that your old policy is still in effect.
If you feel that your current policy no longer meets your needs, you may not have to replace it
Maybe you determine that your life insurance policy death benefit isn't enough. Whatever the reason, you may decide at some time that you need a policy upgrade. The fact is, you may be able to change your policy or add to it to get the coverage and/or benefits that you now want. Ask your insurance professional about life insurance riders or options that may be available for you to increase your policy's limits to meet your needs.
- Depending on your current age and health, consider the likelihood of paying higher premiums for the new policy
Because insurance premiums are rated in part on age and health, terminating your policy and applying for new coverage could mean you may pay more for the same coverage in the future. Moreover, if your health has significantly changed, you may be uninsurable and unable to get coverage.
Deciding whether or not you no longer need coverage or trying to trim your budget by terminating your existing policy may not be in your best interest in the long run. The good news is that you may have other options available. In all cases, check with your insurance agent or life insurance company before making any significant changes concerning your existing life insurance policy.