by Guest » Thu Nov 10, 2011 11:26 am
Hi,
I was advised by a friend to review my term life policy on-line every couple of years and switch companies to save on my premium costs. Is this true? can someone please express their opinion on it?
I was advised by a friend to review my term life policy on-line every couple of years and switch companies to save on my premium costs. Is this true? can someone please express their opinion on it?
Posted: Fri Nov 11, 2011 06:31 am Post Subject:
Well as far as I know, you won't be benefited by doing so.
If you choose to switch companies every couple of years, then as your age increases you'll need to pay higher premiums for a new term policy and would also need to go through health examinations.
Thus, switching would only increase your premium costs not decrease it.
Posted: Fri Nov 11, 2011 07:39 pm Post Subject:
There is usually no advantage to changing insurance companies as you ask.
First, every time you attempt to obtain a lower premium, you will be OLDER than the issue age on your existing policy. That will increase the cost of insurance in the new policy. It is possible that the rate for your age would still permit the premium to be lower, but you would have to prove insurability for the new policy, and you might not be able to do that, or you might be rated substandard, causing your premium to be higher.
Second, and perhaps most important, once your existing life insurance has been in effect for two years (less in a few states), the policy become INCONTESTABLE. At that point, even if you lied about a particular health condition on the application, the insurance company would be powerless to deny the payment of your death benefit. A new policy would require a new two-year contestability period. That could easily work against your best interest.
If you even attempt to obtain a new policy to replace existing insurance, the one thing you would NEVER want to do is cancel your existing coverage before the new policy is issued, and even then, you might want to carry both policies until Policy 2 becomes incontestable.
Posted: Fri Nov 11, 2011 07:47 pm Post Subject:
If one is honest on the application, why would they be concerned about contestibility?
There is no harm in looking into it. If the price is similar, it usually makes sense to switch because it gives you additional years on the backend.
Ex. Jodie is 32 and pays $1000/year for a 20 year level term policy. Two years later, she is able to find a new policy for the same price. She now has a guaranteed premium to age 54 instead of to age 52.
Posted: Fri Nov 11, 2011 08:39 pm Post Subject:
There is no harm in looking into it.
You're right. And part of my post acknowledged that ["It is possible that the rate for your age would still permit the premium to be lower"]. But not everyone is honest when they fill out a life application.
Contestability means nothing to the honest person. Incontestability means everything.
Your point about the later age of the insured is well taken. And that's why everything about the new policy must be better. The age 52 expiration might result in a lower renewal premium than the age 54 renewal. So now there is an impasse. Have to do the math over more than just 20 years to know what's best, don't we?
On this whole thread, I think we probably both agree in concept. Replacement for the sake of replacement probably means more for the agent than for the insured. A replacement that saves the insured a SIGNIFICANT amount of money over time is highly likely to be valuable. Either way, replacement is not something to be taken lightly. And frequent replacement probably does more harm than good at some point.
Posted: Tue Nov 15, 2011 11:22 pm Post Subject:
The age 52 expiration might result in a lower renewal premium than the age 54 renewal.
That is irrelevant because there is nothing that makes the person wait until age 54 to get more coverage. If healthy, they can do it at age 52.
One shouldn't be buying 20 year term insurance worrying about what will happen in year 21.
Posted: Wed Nov 16, 2011 10:45 am Post Subject:
I agree with the statement made above.
A person should be sure of his own insurance needs.
If a person has taken a 20 year term but is worried, what would happen after that period, it's better to take a 30 year term.
Or depending on the person's need and budget a permanent life insurance policy may be more apt.
Switching companies every couple of years as the OP says, doesn't seem to be a bright idea.
Reviewing may be good in case of an auto insurance policy but in case of life insurance, as Maxherr says, it would mean more harm than any actual gain.
Posted: Thu Nov 17, 2011 05:17 am Post Subject:
If a person has taken a 20 year term but is worried, what would happen after that period, it's better to take a 30 year term.
If this is true, that person would be better served with a whole life policy.
Posted: Thu Nov 17, 2011 05:21 am Post Subject:
That is irrelevant because there is nothing that makes the person wait until age 54 to get more coverage. If healthy, they can do it at age 52.
You're right, nothing MAKES a person wait until the last day of the policy. But many do. Then what?
All these "what-ifs" simply get us bogged down in minutia instead of looking the basic concept.
And the basic concept is that when replacing Policy A with Policy B, the new policy must materially IMPROVE a person's situation in allk respects.
Simply obtaining a lower premium without regard to the language of the contract may be pennywise, but could end up being death benefit foolish. Newer contracts are not always as beneficial as older contracts.
Posted: Fri Nov 18, 2011 06:54 am Post Subject: policy switching
Carriers do reduce rates and and add riders.
Posted: Fri Nov 18, 2011 07:35 am Post Subject:
And the basic concept is that when replacing Policy A with Policy B, the new policy must materially IMPROVE a person's situation in allk respects.
It doesn't have to improve a person's situations in all respects. It just has to improve it in one respect without hurting them in others.
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