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How To Adjust Life Insurance Coverage To Meet Changeable Needs

How To Adjust Life Insurance Coverage To Meet Changeable Needs

Our insurance needs change as time goes on. Our nest egg grows, children move out of the house, and spouses draw nearer to their own deaths. Our life insurance coverage should adapt to our changing life insurance needs. One way to make that possible is to choose adjustable life insurance.

The standard in life insurance products is to fix both the face amount and premium of a policy at the time of its creation. Owners of adjustable life insurance policies, though, can change their policies' face amount at any time, which in turn changes their premiums. There are some limits to what you can do with an adjustable life insurance policy, though. The insurance company may require an up-to-date medical exam before it approves a request to increase coverage, for instance.

Universal life insurance is adjustable by default, but even if you choose another variety of life insurance, you can adjust your coverage. You can increase coverage by buying more policies and carrying their collective coverage. Decreasing coverage begins the same way: apply for a new life insurance policy. After your new policy goes into force, though, you can drop your original coverage.

These options leave a chink in your insurance protection, though, and that is that the insurability of your insured may decline in the future. If his/her health fails, then your insurance premiums will escalate, or your applications may be declined altogether. Then you may not be able to increase your coverage or buy a new policy (at least not affordably).

An alternative which protects you against declining insurability as well as providing life insurance that meets your changing needs is to plan ahead. Since individuals' insurance needs generally decrease as they age, most people can satisfy their needs by buying multiple policies when they are young and then dropping them progressively. For instance, at age 35, you might carry three term life policies. At age 35, one of them might expire, leaving you with two term policies. After all, by age 45, you're done paying for your kids' braces, and you don't need to support your spouse for as many years. At age 55, another policy might expire, leaving you with only a single term policy. After all, by age 55, the kids are supporting themselves, and with no child-rearing duties, your spouse may be able to get a job to support him/herself. All that remains of your coverage needs is final expenses and perhaps some standard-of-living maintenance.

by: Mark Manderson
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