Life insurance is a contract between the insurance provider and the policyholder. That contract could be in effect for twenty or thirty years, unlike an auto insurance contract that renews annually. This is a critical point to understand before you buy life insurance online. It’s more of a long-term commitment than auto or health insurance.
How to change life insurance providers
Shopping for life insurance online is easy. Getting approved for a new policy when you change providers might not be. The most pressing challenge is age. No matter the circumstances, you’ll be older when applying for a new policy than when you got the original life insurance policy. That could be by a few months or several years. Either way, you’ll pay more.
There’s also no guarantee that the new insurance company will approve your application. Applying with the new provider before canceling the old policy is best. Shop around, check rates, and take your time. Life insurance provides your loved ones security and peace of mind if you’re prematurely taken from them, so finding the right policy should not be rushed.
Term life versus permanent life insurance
The approval criteria for term life insurance might be less stringent than what you’ll go through to get permanent life insurance. You should still treat it as a long-term investment. Term life provides a death benefit if you continue paying for it. Permanent life insurance accumulates a cash value as you pay your premiums. If you’re changing policies, research both.
You’re not limited to one or the other. Many people use permanent life insurance as an investment instrument and have term life policies to provide extra coverage and/or enhanced death benefits to family members. Changing policies due to inadequate coverage or poor customer service might seem like the right choice, but it’s not your only option.
Criteria for buying life insurance
Life insurance providers use your age and health condition as primary variables in determining eligibility. These are also factors in setting the premium rates. Younger, healthier people pay less, while older adults with preexisting health conditions may pay higher rates. This makes shopping for life insurance later in life more challenging.
Insurance companies assess risk. Life insurance applicants with high-risk conditions like diabetes, obesity, or other serious health problems could get denied. These conditions are not exclusive to older adults, but health deteriorates as the years go by. Under normal conditions, the human body is in better shape early in life. That’s when you want to buy life insurance.
Insurance companies look at other factors such as smoking and the use of nicotine products, consumption of drugs and alcohol, and family medical history. Some providers may ask the applicant to submit to a medical exam. They’ll also ask for financial and employment data when you apply. Be prepared with accurate information for them.
Getting through the contestability period
Getting through the initial approval process doesn’t guarantee the applicant uninterrupted coverage until they choose to cancel or change it. The insurance company has what is known as a “contestability period” during which they can revoke their approval. This contestability period varies by state, but it’s typically around two years.
Policyholders who get through the contestability period can usually keep their life insurance as long as they pay their premiums. Those premiums might increase if their health deteriorates or as they age, but coverage won’t be revoked. If you change life insurance providers and apply for a new policy, the contestability period starts over.
