Renewing your life insurance can be costly
If you have had a life insurance policy for more than eight years, chances are you will be receiving a notice one day informing you your premiums will be going up.
You see, policies written back then were usually 10 year term plans that had a great low rate going in but a renewal rate, that in some cases, could be 3 or 4 times the original premium.
The insurance company sends the letter and hopes you keep on paying, however as long as you are still healthy you should be able to shop around and purchase a new policy for much less than renewal. I have never understood why the existing carrier never offers that. I guess for every one they keep it’s worth the 5 they lose. There is of course a couple of caveats to changing insurance plans, new incontestability and suicide clause but that will be disclosed by your agent. And I always inform my clients never to cancel the first plan until the new one is issued and paid for. I knew of a case once where a client cancelled his old policy because it was too expensive and then applied for a new one which was subsequently declined.
Remember, as high as the renewal premium, is the original insurance company must renew your policy regardless of your health.
Speaking of that, if you know you want to keep your plan longer than the 10 or 20 years it was originally written for you, don’t need to wait until renewal to switch. You may pay slightly more now but you will extend your original term by another 10 or 20 years at the new premium and because you are younger it will be that much cheaper.
The bottom line is life insurance costs have come down drastically over the last 10 to 15 years and you should take advantage of that.
- Phil Edney