Purchasing life insurance is a crucial step in ensuring the financial stability of your loved ones. However, the safety of your loved ones may be compromised if you fail to get sufficient coverage.
You can avoid this by purchasing a policy with sufficient coverage and a long enough duration. Let’s dive into the reasons why you might need additional coverage and how you can do so:
When to consider increasing your insurance coverage
Purchasing supplementary life insurance may be necessary if your financial needs have changed substantially after you first purchased a policy. You may have outgrown your current coverage for a variety of reasons, including:
A raise or better-paying job
More money coming in usually means higher expenses. If you suddenly lose your more substantial source of income, your loved ones can benefit from increased term life insurance coverage.
Having a baby
Having a child also increases your monthly outgoings, from diapers and baby food to future tuition and fees. You might need additional coverage if you didn’t factor in these costs when purchasing your current policy.
A new house
Getting a mortgage typically requires purchasing a life insurance policy as well. Both require significant outlay of cash over a considerable period of time. When you take out a mortgage, you promise to pay back the loan’s originator a certain sum of money every month, typically for two decades. When you sign up for term life insurance, you commit to paying a premium in exchange for a death benefit that will help pay off debts and living expenses (like a mortgage) for a shorter time period.
Top-up your current coverage
The ability to pay a higher premium, or “top-up,” is a common feature of modern life insurance policies. Information on fees and the lowest and highest top-ups allowed are typically included in the policy itself. Adding a top-up premium allows you to get more coverage without having to purchase a new policy. There is a catch, though, as they include a lock-in period.
Depending on the policyholder’s current situation and future expectations, some term insurance plans may offer a top-up feature that lets the insured increase the amount of coverage they have. Policies like this take into account the fact that a prospective buyer might not be able to finance extensive protection, especially if they’re young and at the beginning of their career, but may welcome the option of expanding coverage later on.
Note: A rider or top-up option is not included in every term policy. You may need to consider alternative methods of improving your cover if you have purchased such a policy.
Make sure you discuss your options and requirements with a reliable Franklin Life and Annuity agent before purchasing a rider or new policy. We’re proud to offer comprehensive life insurance and final expense insurance in Houston, TX. Our team can guide you toward the right policy that will protect your and your loved ones’ financial future.
Contact us today for more information.
Switching from term to permanent insurance
No matter how often you renew the term policy, the insurance amount remains the same. However, if you switch your policy to a permanent policy, you may be able to extend the term duration. Several insurance companies provide “term conversion riders” that allow you to change your term life insurance policy into a permanent one when the initial policy’s term expires.
It’s important to switch to a permanent policy at least 6 months before your current term length ends so you don’t have to deal with a coverage gap. In the unlikely event that your insurance provider does not provide a term conversion rider, you should plan to buy a new policy.
Apply for a new policy
If you need life insurance but can’t afford to convert your term policy (either because of the premiums or because your policy has lapsed), you may want to consider applying for a new policy altogether. You can either cancel your existing policy and replace it with this one, or use the “ladder” approach and layer it on top of your present policy. You can save money on insurance premiums by following the ladder approach, which provides extensive coverage upfront but gradually reduces or even eliminates that protection as your financial commitments decrease.
Note: After almost six months, the life insurance medical exam becomes invalid, and you must complete the underwriting process once more.