How to do it and what to be aware of!
If there is one constant in life, it is change. Things change all the time, and your life insurance policy shouldn't be an exception.
There are plenty of reasons to change your policy, but I would like to explain the most obvious ones.
- New job
You may have been promoted or got a different job, and you are now earning a different amount per month from before, so it may be smart to adapt your life insurance policy. If you got a wage hike, you might want to lift your premiums and ultimately get a higher payout.
Or perhaps, your new job pays you less than the previous one, which means you can’t afford premiums as high as before. Those are all valid reasons to think about modifying or changing your policy.
- New family member
You just had a baby, and we all know children are a huge financial responsibility, so your life insurance should reflect that.
- New property
You decided to move, get a bigger house, and with it, a bigger mortgage. Are you sure that in the case of your death, your family could afford to pay that extra expense? Make sure your family is protected with an amount that will allow them to pay off the mortgage and not become homeless.
- You paid off your mortgage, and you don’t need coverage as big as before, so maybe you would like to reduce your premiums.
- You extended your mortgage, and now you need more coverage to protect it. Checking your policy and tailoring it to your needs may be a reasonable option.
- Better deal
The life insurance market is an open market, meaning every provider can have different terms, different offers, and sometimes it makes sense to pursue a better deal that can save you money, get you a bigger lump sum, or lower your premiums.
A life insurance policy is a contract, and when you sign it, you and your insurer make some commitments. Before deciding to change your policy or even your insurance provider, note that there are some things you need to check beforehand, so you don’t end up stuck with unsatisfactory terms or, even worse, without a policy!
Note that different providers have different practices and terms in contracts, so make sure you talk with your advisors about the options and modifications you can make within your contracts first, as well as any possible extra costs they intend to charge you for doing so.
Another option is to change your insurance company, but note that you will not be able to transfer your existing policy – you will need to take out a new policy, and that is something you need to be very careful with!
Most insurers allow you to change the beneficiary at any time, take more cover, remove a name from joint accounts, change the way of paying premiums (annually or monthly), change the length of your cover, and many other options.
If you decide to change your insurance company, be careful, as there are some factors you need to take into account.
- Make sure your new provider is registered with the FSCS (Financial Services Compensation Scheme). This way, if your new company fails to pay, the FSCS can step in and compensate you.
- Don’t cancel your existing policy before getting a new one, or you might end up without one.
- Take into consideration that you are older than you were when you took out your initial policy, and as we know, age is a factor when it comes to premiums and the cover. Also, the older you are, the more likely it is that your health is not as good as it was in your younger years. So don't forget, the policies tend to be more expensive the older you get.
- You will most likely need a new medical review.
Tip From Genius James:
Take a look at your policy once a year and assess your needs and changes in your lifestyle that occurred from the last check-up.