People often get tempted to when life insurance companies comes up with low premium term insurance plans. Term life insurance provides protection for a specific period of time. It pays a benefit only if you die during the term. If you live beyond the specified term, the policy expires without value.
Premiums of term insurance plan have been falling over the past few years. Most of the people think that it's absurd paying higher premiums for term insurance, where they only get risk cover and no return on maturity. So they often plan to switch to low cost term plan.
But, would it be wise to switch to new term insurance plan? Though new policies charge less premium, but its always better to weigh down all pros and cons before switching to a new term policy.
Points to keep in mind before you switch to new term plan:
- Before you switch to a new term insurance plan, make sure it is better than the existing one i.e. you will be saving on the total premium payable on the new policy. And, if your agent now works for another company then think carefully before switching.
- Be sure to discuss any change in your coverage with your financial advisor.
- Make sure the new company has accepted your application and issued the new policy before you cancel the old one.
- When you cancel a policy in the middle of its term, many companies will not give back any premiums you have paid which will be a complete loss of money.
- When you grow old, the mortality charges rise and so as your premium. So, you must look at the new premium you would be required to pay.
- You must also look at your health condition. Any sign of deteriorating health would pull in extra loading on the premiums. So make sure you are in good health and can qualify for another policy.
- Check the rider benefits available with the new products carefully. Riders are optional policy provisions that pay additional money to your beneficiaries such as accidental benefit rider – pays your beneficiaries if your death was the result of an accident, waiver of premium rider – pays your policy premium if you become permanently and totally disabled, living benefits rider – pays a portion of your death benefit payment in advance if you are diagnosed with a terminal illness or if you require long-term care or nursing-home services, etc.
Take the time to educate yourself about life insurance options available. A good insurance agent can help walk you through the process and suggest you whether it would be wise to switch the term insurance plan or not.