What does refinancing a term life insurance policy involve?
Switching a term life insurance policy basically means that you cancel your insurance with your current insurer and renew it with another insurer. So you simply change insurers without changing anything about your insurance itself (although that is not always possible).
There are several reasons why you might want to switch a term life insurance policy. Before you do so, however, it is important to take a number of things into account and inform yourself as best you can on the subject. The overview below will certainly help you with that.
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Why should you refinance a term life insurance policy?
In what situations is refinancing term life insurance a good idea? Read more below:
1. You want a financially better solution
One of the most common reasons for switching a term life insurance policy is that the premium for the current term life insurance policy is too high. After all, the monthly premium you pay varies from provider to provider, and chances are you can find a cheaper solution.
People often think that switching their current term life insurance with another insurer will cost more money, since they are also older than when they took out the first policy. However, this is not always the case, as premiums for the same age usually decrease as life expectancy increases.
2. You want better conditions
You may also be unhappy with the terms and conditions at your current insurer. Is the minimum age too low according to your expectations or is there, for example, an obligation to pledge your life insurance when you do not want to? In such situations, it pays to consider a possible rollover.
How can you refinance term life insurance?
How exactly does the refinancing of life insurance work? Here is a clear overview:
1. Apply for your new term life insurance policy.
To transfer your current term life insurance policy, you must first apply for a new one. This can usually be done online using a form in which you enter the end date, the amount insured and other details related to your current insurance. This will show you how much you will pay with the new insurer.
2. Insurer's assessment
Then the new insurer will review your application, based in part on your re-filled health statement. In most cases, this too can be done digitally, making the process a lot faster.
3. Cancel your old insurance
Once you have been accepted to your new insurer, you can cancel your old term life insurance policy. To do this, you usually use a formal cancellation letter, but in some cases it can be done entirely online on your old provider's website
The advantages and disadvantages of switching a term life insurance policy
What are the main advantages and disadvantages of underwriting term life insurance ? Here is a brief overview:
- You'll find life insurance that suits you faster
- It is often cheaper as overall life expectancy increases
- You pay less premium if your health condition is better than before
- You will probably pay additional (termination) fees to your old insurer
- You have no assurance that you will be accepted for your new term life insurance policy
- You may lose (part of) your current premium savings pot