If you are seeking to cut costs, reducing or dropping your life insurance may seem like a safe bet. In some cases, it might even be a good idea. However, think very carefully before making changes to your policy; once you drop coverage, you will probably pay a higher premium due to being older.
There are some key points in life where reviewing your coverage makes sense:
You pay off your mortgage. For most Americans, a mortgage is the single biggest debt they owe and a big reason for getting life insurance. Once you have paid off your mortgage, it may be a good idea to review your coverage and see if changes should be made.
Your children leave home. One of the first things many prospective parents do is increase their life insurance coverage to protect their new family from the financial aftermath of their death. Once the kids leave home (for good), you might want to review your coverage and determine whether you still need as much as you have.
You have fewer financial obligations. Whether you have cut back on your lifestyle or paid off your debts, you may reach a point in life where you have fewer expenses to pay. If your life insurance coverage is still based on old calculations, it’s a good idea to sit down with your professional and review your coverage. However, if your changed circumstances have come around because of a job loss or other unexpected event, think twice before canceling your life insurance; you might be leaving your family without needed protection.
Dropping a life insurance policy isn’t a decision that should be made lightly, especially if you have a whole life or convertible term policy. Think carefully about whether the short-term savings in premiums is worth leaving your family without the coverage.
If you think you want to reduce your life insurance or haven’t reviewed your coverage in some time, give us a call to schedule a complimentary consultation.