Many people think that once they sign a policy, they are locked in to the agreement for either the duration of the term or life/death, as it may be. The truth is, people switch policies all the time. They do so because they are not satisfied with their service, death payout, return, or payments. Usually, there are fees and penalties however, so it doesn't always make sense to switch plans prematurely. This article will prepare you for making that decision.
Reasons to Switch
It is worth looking at the reasons you might want to switch. Each reason comes with legitimate concerns that you should fully explore before jumping off that cliff.
Better Rate
If a different insurance provider offered you lower payments than the plan you are currently on, this doesn't necessarily mean you should switch. There are a lot of other factors to look at.
1. Interest rate:
Most whole life and variable life policies offer a savings plan where your payments are saved at some kind of interest rate for the future. While it is always less than inflation and not a great savings plan compared to a 401k and similar plans, the difference between saving 2% and 5% could well make up for the difference in your payments.
2. Reliability and Reputation:
Some insurers are able to offer really low rates because they have shady practices that earn them higher profits than others at the expense of their customers. Make sure you are not switching from an honest, reliable provider to a less honest, reliable one.
3. Payout:
The difference in death payout could really not be worth the difference in payments. If the amount you are insured for falls significantly, you might as well stick with the higher payment.
Can't Make the Payments
If you are having a hard time affording the payments, you might want to see if your current provider will lower your payments. If a different insurer wants to give you a policy for a better rate, chances are that you have become less of a risk and your current provider will consider renegotiating to keep you.
Dissatisfaction with your Provider
Of all the reasons out there, this might be the best reason to switch. You have got to trust your insurer - they are responsible for your family when you are gone. Just make sure that the company you are switching to is better.
Need some help deciding? The Consumer Federation of America - a nonprofit advocacy group - will run an analysis for you for less than $100 to make sure it's worth it.
Converting your Life Insurance
If you want to switch from Term to Whole life insurance - either for better coverage or investment purposes - it might be pretty easy to simply convert your existing policy.
Contact an insurance agent or representative from your insurer and see if it is possible. Try to get as flexible a policy as you can, because it is going to last your entire lifetime and your financial situation is probably going to change more than a few times.
It's a good idea to compare quotes online from other companies so that 1) you can make sure converting is the cheaper option, and 2) you can negotiate your cost down on the whole life insurance policy.
Remember, buy holistically.
Reasons to Switch
It is worth looking at the reasons you might want to switch. Each reason comes with legitimate concerns that you should fully explore before jumping off that cliff.
Better Rate
If a different insurance provider offered you lower payments than the plan you are currently on, this doesn't necessarily mean you should switch. There are a lot of other factors to look at.
1. Interest rate:
Most whole life and variable life policies offer a savings plan where your payments are saved at some kind of interest rate for the future. While it is always less than inflation and not a great savings plan compared to a 401k and similar plans, the difference between saving 2% and 5% could well make up for the difference in your payments.
2. Reliability and Reputation:
Some insurers are able to offer really low rates because they have shady practices that earn them higher profits than others at the expense of their customers. Make sure you are not switching from an honest, reliable provider to a less honest, reliable one.
3. Payout:
The difference in death payout could really not be worth the difference in payments. If the amount you are insured for falls significantly, you might as well stick with the higher payment.
Can't Make the Payments
If you are having a hard time affording the payments, you might want to see if your current provider will lower your payments. If a different insurer wants to give you a policy for a better rate, chances are that you have become less of a risk and your current provider will consider renegotiating to keep you.
Dissatisfaction with your Provider
Of all the reasons out there, this might be the best reason to switch. You have got to trust your insurer - they are responsible for your family when you are gone. Just make sure that the company you are switching to is better.
Need some help deciding? The Consumer Federation of America - a nonprofit advocacy group - will run an analysis for you for less than $100 to make sure it's worth it.
Converting your Life Insurance
If you want to switch from Term to Whole life insurance - either for better coverage or investment purposes - it might be pretty easy to simply convert your existing policy.
Contact an insurance agent or representative from your insurer and see if it is possible. Try to get as flexible a policy as you can, because it is going to last your entire lifetime and your financial situation is probably going to change more than a few times.
It's a good idea to compare quotes online from other companies so that 1) you can make sure converting is the cheaper option, and 2) you can negotiate your cost down on the whole life insurance policy.
Remember, buy holistically.