You may already have life insurance, but you might want to get life insurance with another company. It could be that you have a life insurance policy that is not right for you, or it could be that your rates are too high, or your policy is too small – or too big. So you are considering switching your life insurance coverage. To do so, you would find life insurance with another company, then simply switch over to the new coverage. In the meantime, here are some tips of things to consider before replacing your coverage:
Before you switch, check out your current company
It may be the right time for you to switch your life insurance policy – the company offers a policy that doesn’t work for your needs – or it might be the time to check out what your current company offers first. For example, if you are thinking of getting more life insurance for yourself, perhaps you should consider working with your current life insurance company first. The same goes if you would like to get a smaller life insurance policy. It may indeed be the right decision to go to a different life insurance company, but please check with your current company first.
Make sure you are dealing with a reputable life insurance company
You do not want to be a victim of “churning” – where an unscrupulous life insurance agent sells you a policy that is not right for you, simply to get a commission from it. Before you agree to a new life insurance policy, be sure that the new company is on the level.
Do not cancel your old policy until the new policy is fully in effect
If you do decide to switch coverage, keep in mind that your new insurance company could potentially reject you, even after you sign up with a policy. So you may want to hold off on cancelling the old policy until the new policy is in effect, especially if you have to get a medical exam, and there is a chance your coverage could be rejected.
Don’t forget about the contestability clause
With your previous policy, there was a two-year contestability period. For example, that means that if the insurance company found something that contradicted what you said in the application, the policy could be cancelled. For example, if you said you never smoked, but you died of a smoking-related disease, the insurance company could refuse to pay your beneficiaries if this took place within the contestability period.
So with a new policy, you would have to deal with the contestability issue all over again. That is something you may want to keep in mind before switching life insurance policies.
Lisa Swan is a frequent contributor to life insurance and financial planning blogs, including Best Life Insurance Deals.