You Need to Know This Before Replacing a Term Life Insurance Policy

If you’re considering replacing a term life insurance policy, use the worksheet provided here to help make your decision easier. This worksheet summarizes some important factors to consider. Not all of these factors necessarily apply to your situation. It is not an exhaustive list, but it covers the most likely scenarios.

It’s a good place to start deciding whether or not to replace an in-force term policy with another one.

Term insurance generally does not pay dividends and does not accumulate cash values. These policies run for a specified period of time and expire without value at the end of that term. During the term, it provides pure life insurance protection in the amount for which you contracted with the life insurance company.

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A good example is a one million dollar 10-year term policy. If the insured dies during the 10-year period, the policy pays the one million to the designated beneficiary. On the other hand, if the insured person dies after the 10 years is up, the policy pays nothing.

Many term policies are renewable at a higher premium rate, and many are convertible to permanent life insurance at any time during the policy term.

Term policies come in many forms. The most common are annual-renewable term, decreasing term (e.g., mortgage cancellation insurance) and level-premium term. Some policies offer guarantees, while others do not.

It pays to shop around.

You may also want to record the comparison information you are given, the source and the date. Try to verify that the information is current because you will be making a decision based on this information.

Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit to join the GET READY! Financial Preparedness Club and access free resources.

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