Why do should you not change your life policy to new one? Whether the change is due to financial reasons, change in your circumstances or simply an end to the current policy, the decision should be carefully considered before making any move. There are various questions that should be answered before taking the next step.
Comparing the two plans is helpful. For example, there is a significant difference between whole life insurance policies and term life insurance. While term life insurance is often cheaper than whole life insurance, it may not guarantee a benefit payment after expiry (Baker, 2012).
Some insurance companies require their policyholders to pay charges should they want to cancel their policy. This considerably decreases the benefit of changing plans. When planning to switch, talking to the insurance company about any fees payable is important (Fier and Andre, 2013).
Some insurance plans are modifiable should the holder’s financial needs change. It may be possible to add a new rider or reduce your life insurance coverage to better meet the policy holder’s needs (Bodie, 2013). It is important to speak to the insurance company to fully understand available options for those willing to change policies.
There are any reasons why people consider changing their life policies. However, it may not be reasonable to change the policy. Owing to the long-term nature of many life insurance policies, there is a probability that circumstances will change over the term of the policy. While it may be costly to alter a life plan, in some cases, it makes sense.
Baker, Tom eds. Embracing risk: The changing culture of insurance and responsibility. University of Chicago Press, 2010.
Bodie, Zvi. Investments. McGraw-Hill, 2013.
Fier, Stephen G., and Andre P. Liebenberg. "Life insurance lapse behavior." North American Actuarial Journal 17.2 (2013): 153-167.