Life insurance ownership has been declining over the last decade. Based on LIMRA research in January of 2022, only 50% of consumers owned life insurance. That percentage was down from 59% in 2012. Life insurance owners may be tempted to ditch their current policy if they feel it's too costly or no longer needed.
Fortunately, there are alternatives, such as getting life insurance with no medical exam, that can make it possible for shoppers to continue having a policy. Here are four questions life insurance owners should ask before ditching their life insurance.
1. Would the policyholder's life insurance policy give their beneficiaries the support they need?
A policyholder getting rid of their life insurance policy would mean their beneficiaries may lose the support they need if the policyholder were to pass away. In particular, if the policyholder is the primary wage earner, with the loss of their income, the family would struggle to pay daily living expenses such as gas and groceries. One survey found that families would start struggling within six months of the primary wage earner's death. Therefore, a life insurance owner should consider carefully if their family would still need their policy's death benefit if they were to pass away.
2. Is there a more affordable coverage option?
Given constantly changing financial circumstances, some life insurance owners may wonder if their policy is too expensive to continue owning. Instead of ditching the policy, life insurance owners can look around to see if there's a more affordable option. Some providers will allow a policyholder to convert their current policy into a different type. For example, a life insurance owner might decide a whole life policy is no longer affordable for them and choose to convert the policy to a cheaper term life policy.
3. Is the policyholder's family at risk of losing their house or car?
Some life insurance owners choose to get a life insurance policy to cover a debt, such as a car loan or mortgage. Life insurance owners may feel they've paid off enough of the debt to no longer need a policy. Instead of getting rid of the policy, an alternative that could be considered is reducing the coverage amount. For example, let's say an individual is currently 20 years into a 30-year mortgage. A policyholder could reduce their coverage amount to the amount left that needs to be paid off. Reducing the coverage amount also reduces the cost of the coverage, making it more affordable.
4. Will the policyholder's final expenses be taken care of?
Some policyholders may be at the point where their children are financially independent, and all of their debts are paid off. While life insurance may no longer be needed to cover these expenses, it might be needed to cover final expenses. Without a policy, funeral costs can burden surviving family members financially. If a policyholder's current policy is no longer needed, they could consider converting it to a final expense insurance policy. One advantage to this policy is that it generally requires no medical exam. Final expense insurance can help cover funeral and end-of-life costs and allow a family to keep their focus on grieving. Carefully considering these questions can help life insurance owners make a better decision on what to do with their policy.
Answering the questions in this article is the first step to ensuring that you get an insurance policy that fits your needs. Of course, after really thinking about life insurance and how it can help your family, you probably have some questions of your own. With the rest of the questions, Fidelity Life can help guide you through the process.
Fidelity Life offers no medical life insurance. Life insurance shoppers can discuss their options with an agent or shop for online life insurance quotes. The process is quick and easy and starts with answering a few questions to get matched with a policy that suits their needs. Fidelity Life will then guide the applicant through the application and purchasing process.
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Original Source: Fidelity Life: What to Think About Before Ditching a Life Insurance Policy