Drop That Life Insurance!

Well, it’s not exactly what you think. Everyone knows that the best use of life insurance is to keep it in force permanently. This way you know the benefit will be paid.

So really, you don’t want to drop your coverage – but you may want to drop an individual policy. Here are three reasons why:

Price increase on term

Term policies come with a premium guarantee for a set amount of time. This could be 10, 15, 20, or 30 years. But what if you need coverage past that point? The renewal premium could be enormous. It is time to drop that policy and pick up a new one that will cover you for as long as you need. Just remember to keep the existing policy until the new one is in force.

Underperforming universal life

Some people have had these permanent policies for decades. Unfortunately, twenty or thirty years ago they may been sold with unrealistic interest assumptions. With a projection of 10%-12% or more, the premium scheduled could have been pretty low. By now, however, reality has set in and these policies are not nearly performing at that level. And so the company is demanding higher and higher payments. Time to switch to a price–stable product.

Poorly-managed variable life

Many consumers bought this investment-based product for its cash-accumulation potential. The idea was to grow significant cash inside life insurance and thereby take advantage of its tax protection features. However, like any investment, the funds must be managed. The allocation of the premium into different asset classes must be determined wisely and monitored regularly. Smart changes must be made. Too often, however, the policyholder doesn’t do this. If the broker doesn’t mind the store, then odds are the performance of the policy will weaken. It could be time to switch to a policy that requires less attention.

There you have it. Here are three reasons why somebody may want to drop his or her life insurance – and make a change for the better. Do any of them apply to you?