Changing Your Life Insurance Policy
Compare life insurance policies with Money Expert
Last updated: 06/10/2020 | Estimated Reading Time: 4 minutes
Once you've taken out a life insurance policy, it is important to go over and review your cover fairly regularly to make sure it is always up to date with your personal situation.
Your financial position might change; your family might change in some way; there are any number of things that could change in your life that would have a bearing on the kind and level of cover you need from your life insurance policy.
First we’ll look at a few common reasons why people might want to change their life insurance policy, and then we’ll go through the changing process itself.
Given that your life insurance policy will pay out a certain amount to your family or other dependents in the event of your death, if your familial situation changes, say you have another child for example, then the nature of your policy should change with it.
If your family grows in size, then the initial amount set out might not be sufficient any more, and so you can amend your policy, increasing the final pay out to accommodate for this.
Say you have no children when you take out the life insurance policy, having taken it out purely to pay off the remainder of your mortgage or other household debts. If you then have a child, you might want to consider increasing and/or altering the pay out so that it includes a regular annual income delivered to your child.
One of the most common reasons for taking out a life insurance policy is so that in the event of your death, a lump sum is paid out that helps to cover any remaining payments left on your mortgage or other debt.
The circumstances surrounding your debt may well change, for better or for worse. Perhaps you’ve moved to a larger house, increasing the amount you have to pay back or, conversely, you could’ve come into a large amount of money, say through inheritance, and might not need as big a pay-out as you initially signed up for.
Either way, when the terms of your insurance policy are no longer in line with your personal and financial circumstances, it’s time to change your policy.
Now let’s take a look at how you’d go about doing just that.
So you’ve decided that for whatever reason, your current level of cover is no longer appropriate considering your situation. You now have three options available:
1. Change the scope of cover on your current policy
2. Change to a different provider
3. Cancel your policy altogether
Some, but not all, life insurance providers will allow you to increase or decrease the level of cover you receive from your current policy. Your premiums will be adjusted accordingly and in some cases you may need to undergo new health checks in order to make sure the policy is fully up to date, though this is not always the case.
For those with an insurer who will not allow alterations to the level of cover already being experienced, you’ll want to look into other insurance providers in order to get what you need. If this is the case you should make sure you shop around, using a comparison service like ours to get a life insurance quote from multiple providers, in order to guarantee you’re getting the most for your money.
In some cases, it is actually better to keep your existing policy and to take out an extra ‘top-up’ policy from another provider to make up the shortfall. This is often the case with those who need to increase the agreed pay out, say for those who’ve had to increase their mortgage size or have had more children.
If you are lucky enough to have come into enough money to eradicate the need for your policy altogether, then cancelling is fairly straightforward and shouldn’t cost anything extra.
You should think carefully before cancelling your life insurance policy outright though, as you don’t want to leave your family in dire financial straits should the worst happen.