Reasons for Replacement of Life & Health Insurance

When you select a life or health insurance policy, the idea is to protect you and your loved ones from the expenses that would result from your illness, injury or death. Sometimes it becomes necessary to replace your existing policy for one that better suits your needs.

Life Changes

When you buy a life or health insurance policy, you typically buy one that fits your needs at the time. However, life circumstances rarely stay the same. For example, you may have another child or take on more assets over time. When this happens, your current policy eventually becomes outdated. If the cost of adding additional coverage to the current policy makes your policy more expensive than getting a new one with a different company, replacing your coverage is the better option.

Economic Changes

Like all other services and goods, health and life services, such as office visits or funeral preparation, are subject to inflation. Life insurance policies purchased 10 years ago or more may be overpriced, since insurance companies adjust their mortality tables to reflect how long people are living, as pointed out by the EmaxHealth website. Similarly, as doctors and hospitals charge more to keep up with rising operational costs, the amount of coverage in your health policy may become insufficient.

Health Rating

Both life and health insurance companies decide your premiums based on your health rating, so you typically get a lower premium if you are in good health. However, as indicated by LifeInsurance.org, there is no standard for the criteria that the insurance companies use to establish these ratings. You may receive a poor health rating from one company and a good rating from another. This can impact how much your policy costs. Replacing your policy makes sense if you can find a company who will give you a better health rating and lower resulting premium.