Refinancing a Life Insurance Policy

How much are you paying for your term life insurance policy? Even if you got a great deal on your policy several years ago, there’s a strong possibility that you’re overpaying for it now. For more than ten years, rates on term life insurance policies have been consistently dropping; to the point that some believe rates have reached an all-time low. So why not take advantage of the rates by “refinancing” your life insurance policy? Similar to refinancing your mortgage, you can get a lower rate on your life insurance policy as well.

Who Should Refinance?

  • One reason to refinance your life insurance policy is if you didn’t qualify for premium rates with your current provider. All insurance companies have different standards and you could very well get a premium policy with a different provider.
  • Another reason you may have to get a new life insurance plan is if you bought your current policy several years ago. Now you’re probably thinking a new policy would cost more since you’re older. In actuality, more competition and longer life expectancy rates have driven rates down for the older crowd as well.
  • Finally, if you purchased your original plan through your employer then you’ve probably been overpaying for life insurance from the start. Employers have to price their plans based off the high-risk employees, so you may be overpaying because of them.

Things to Keep in Mind

  • Even if you know you’ll have a new policy shortly, don’t cancel or stop paying for your old one until it’s in place. You’ve already paid a lot of money for the coverage, no point in putting yourself at risk to save a couple bucks.
  • Always make sure you buy enough coverage and that it lasts long enough. Most experts agree that a 30 year policy is usually the best length for younger families, as it guarantees your rate will stay the same as you push into your 60’s. With children staying closer to the nest for much longer these days, that kind of coverage is a necessity.
  • Be honest on your insurance application, even about things that may cause your rate to increase. Insurance companies often investigate claims and can refuse to pay the benefit of your policy if you knowingly lie on the application.

Additional Resources