The Premium Increase Dilemma
Term life insurance is a valuable financial tool, but what should you do when your insurance provider sends you a renewal letter with a substantial premium increase? After the initial shock wears off, you will need to determine if you still require the coverage. If not, you can cancel. However, if you still need the life insurance, here are your options:
Option 1: Do nothing - Simply pay the higher premiums and keep what you have.
Option 2: Apply for New Life Insurance - If a term conversion doesn’t make sense for you, applying for a new life insurance policy may be best:
Potential for lower premiums: If you are in good health since purchasing your current policy, you may qualify for a more competitive premium rate with a new one.
Customization: Applying for a new policy allows you to customize your coverage to your current financial situation. You can choose the coverage amount and policy type that best suits your needs.
Options from different providers: Exploring new policies provides the opportunity to consider options from different insurance providers, potentially leading to better terms.
Option 3: Convert to Permanent Insurance - Some insurance providers allow you to convert a certain amount of your term life into a permanent policy without undergoing medical exams or underwriting. This has its advantages:
Stability in premiums: Permanent insurance, such as whole life or universal life, typically offers level premiums for the duration of the policy, providing financial predictability.
Preservation of coverage: By converting, you can retain some or all of your current coverage, ensuring that your loved ones remain protected, even if your health has changed since the initial policy purchase.
Simplified process: The conversion process is often more straightforward than applying for a new policy, as it leverages your existing insurance. You won't need to go through the extensive underwriting process again.
The decision about whether to keep, apply for a new policy or convert your term life insurance ultimately depends on your unique circumstances and financial goals. If your top priorities are stability, convenience, and preservation, conversion may be the better choice. Conversely, applying for a new policy might be the right move if you believe you can secure more affordable premiums with a new policy due to improved health or other factors.
At Tune Financial, we understand the importance of finding the right insurance solutions to meet your needs and budget. If you're facing a premium increase or have questions about your life insurance, we would be happy to discuss your options and provide guidance to help you make informed decisions. Contact us today to explore how we can help you write your money story.