Life Insurance: Changing My Policy, My Way

Changing your life insurance policy can be a straightforward process, but it's important to do your research and be aware of the potential costs and risks involved. Here are some key steps and considerations to help you navigate the process:

Firstly, review your current cover to assess if it still meets your needs. Life circumstances can change over time, impacting the level and type of insurance required. Common reasons for adjusting your policy include changes in income, family dynamics, mortgage status, and life events such as divorce or becoming a legal guardian.

Next, compare different life insurance policies on the market to find the best fit for your updated requirements. Consider factors such as cost, coverage amount, policy type (term or permanent), and the reputation of the insurer. It's beneficial to consult with a licensed insurance agent or financial advisor during this process to ensure you're making an informed decision.

Before making any changes, it's worth checking with your current insurer to see if they can accommodate your new needs. Amending or adding to your existing policy might be a more feasible option, and your insurer may be willing to make adjustments to retain you as a customer.

If switching insurers is the best option, ensure you have the new policy in place before cancelling your old one to avoid a gap in coverage. Be mindful of potential fees, tax implications, and waiting periods associated with starting a new policy, especially if you're switching from one whole life policy to another, as you'll need to transfer any accrued cash value.

Finally, remember to review the terms and conditions of your new policy carefully, including any contestability or suicide clauses, and ensure your chosen insurer is registered with the relevant financial protection schemes.

Reasons to switch life insurance providers

There are several reasons why you may want to switch life insurance providers. Here are some key reasons to consider:

• Changing needs: Your life circumstances may have changed, requiring a different type of coverage. For example, if you've had children, gotten divorced, or experienced a significant increase or decrease in income or estate value, you may need to adjust your coverage accordingly.
• Level of coverage: You may find that your current level of coverage is no longer suitable for your needs. Perhaps you want to switch from a term policy to whole life insurance for permanent coverage, or vice versa.
• Employment changes: If you've changed jobs, you may need to reevaluate your life insurance benefits. Consider the group life insurance benefits offered by your new employer and whether you need to supplement that coverage with a privately owned policy.
• Policy expiration: If your term life policy is ending and you still need coverage, you may want to switch to a new policy with a lower death benefit or one that covers only final expenses.
• Financial changes: Your financial situation may have changed, impacting your ability to pay premiums or prompting you to incorporate a cash value policy into your financial plan. You may also discover that your beneficiaries' financial needs have changed, requiring an adjustment to your death benefit amount.
• Improved health: If you've made positive changes to your health, such as quitting smoking or losing weight, you may qualify for a better premium by switching providers.
• Cost savings: Shopping around and comparing quotes from different insurance providers may lead to finding a more affordable policy with the same or better coverage.
• Increase in coverage: If your circumstances have changed, such as becoming a parent or receiving a promotion, your current policy may not provide sufficient coverage. Switching providers can allow you to increase your coverage to meet your new needs.
• Single or joint life insurance: Depending on your relationship status and protection needs, you may prefer to take out two single life insurance policies or apply for a joint life insurance policy.
• Poor customer service: If you're unhappy with the customer service provided by your current insurer, switching providers can help you find a company that offers better service and support.

How to switch life insurance providers

Life insurance is there to protect your family and your finances, so it's important to make sure your cover reflects any big life changes. You can switch life insurance providers at any time and you don't have to stay with one provider for the rest of your life. Here is a step-by-step guide on how to switch life insurance providers:

Step 1: Review your current cover

Before making any changes, review your current life insurance policy to understand the terms of your cover and any potential penalties for cancelling. Consider whether you want to adjust your level of cover and check with your current provider if they can offer a better deal.

Step 2: Research alternative providers

Shop around and compare alternative providers to find a policy that suits your new circumstances. You can use comparison websites or speak to insurance providers directly to get quotes. Consider the type of policy you need, the amount of cover, and the term of the insurance. Also, be prepared to answer questions about your health, postcode, contact details, and medical history.

Step 3: Consider the costs

Switching life insurance providers may result in additional costs. Taking out a new policy at an older age may be more expensive due to increased risks associated with ageing. There may also be surrender fees or cancellation fees with your current provider, especially if you have whole-of-life insurance.

Step 4: Understand the application process

When applying for a new life insurance policy, be prepared to provide detailed information about your health, job, and lifestyle. The new provider may need to contact your doctor to obtain additional medical information, which can take around 14 days.

Step 5: Cancel your existing policy

If you decide to switch providers, contact your current provider to cancel your existing policy. Make sure you understand any cancellation fees or other charges that may apply. Also, ensure there is no gap in your cover by starting the new policy before cancelling the existing one.

Step 6: Review your new policy

Once you have switched to a new provider, carefully review the terms and conditions of your new policy. Check for any price increases, waiting periods, or other changes to your cover. It is important to ensure that you are happy with the new policy and that it meets your needs.

Things to remember when switching

• Check for surrender charges: If you're cancelling a permanent life insurance policy, you may be charged a fee. Find out how much this will be before you cancel.
• Pay attention to taxes: Understand the tax consequences of dropping your old policy. Consult a financial expert or tax accountant if you're unsure.
• Be aware of price increases: Your new policy will likely be more expensive, due to your increased age and higher risk of claiming.
• Compare benefits: Ensure you're not losing any essential coverage by examining the benefits of new policies closely.
• Consider changing your current policy first: You may be able to save time and money by amending or adding to your current policy. Your insurer may be willing to make adjustments to retain you as a customer.
• Note the waiting period: Most new policies have a waiting period before certain death benefits become effective.
• Understand any losses or payouts from your old policy: When you cancel an existing policy, make sure you know the financial consequences. For example, if you have a permanent policy, consider whether it's worth losing the money you've already paid into it.
• Talk to your current provider: Your current insurance company would likely prefer to retain you as a customer, so talk to an agent to see if they can draft a new policy that meets your needs.
• Double-check for any bundling discounts: If you're switching providers, you might lose your current bundling discount. However, you could also gain a bundling discount with your new provider if you move other insurance policies across to them.
• Check the new insurer is registered: Only choose an insurer that is registered with the Financial Conduct Authority (FCA) or Financial Services Compensation Scheme (FSCS). This means that if the insurer goes bust, your money (up to a certain amount) is protected.
• Start your new policy before ending the old one: Make sure your new policy is active before cancelling your old one, so you don't have a gap in coverage.

Alternatives to switching

If you're not completely set on switching life insurance providers, there are a few alternatives to consider:

• Changing your current coverage: Contact your insurance provider and ask them about the possibility of making adjustments to your current policy. They may be able to help you change the type of policy you have or adjust the level of coverage.
• Conversion or renewal: If you have a term policy that is about to expire, you can ask your insurance provider if you can convert it to a permanent life insurance policy. If that's not an option, they might be able to renew the policy or extend the term.
• Keep your existing policy and purchase a second one: If you feel confident about your financial situation and future needs, you can purchase multiple term policies that overlap. This "laddering" strategy ensures that your coverage is robust and provides a strong financial cushion in the years when you need it most.
• Add riders: Instead of replacing your policy, consider adding riders to expand your coverage. Riders like critical illness, long-term care, or accidental death benefit riders can enhance your coverage.
• Layering policies: You can keep your current policy and add a new one for additional coverage. This approach is known as "layering" policies and can provide more comprehensive coverage without the drawbacks of cancelling your existing policy.
• Supplemental insurance: If your insurance needs have changed, you may want to explore supplemental insurance options to meet your evolving needs.
• Review your policies regularly: It's important to periodically review your life insurance policy, especially after significant life events, to ensure that it still meets your needs.
• Loyalty benefits: Ask your provider if they offer any loyalty benefits or if there are any benefits to staying with them.
• Seek expert financial advice: Consult a registered financial adviser or insurance broker to get expert advice and ensure you have the most suitable insurance policies for your unique circumstances.

When to re-evaluate your life insurance needs

Life insurance needs aren't static. As your life circumstances change, you must reassess your coverage and update your financial plan. Here are some key moments to be aware of and how they can affect you:

Young Adult

If you've been on your parent's policy, it's time to consider stepping out on your own. Getting basic coverage to start building financial security may be what you need.

Newly Married

This is a great time to evaluate coverage. Think about what it would take for your spouse to cover the cost of the mortgage, taxes and other expenses without you.

New Parents

Once a baby arrives, it's time to start looking at what it takes to keep things running if your income disappears. Even if you're a stay-at-home parent, there would be a certain financial burden for things like childcare if you weren't there.

Empty Nest

It's important to carefully evaluate this stage in life to make sure there is plenty to provide for you or your spouse if one of you dies. You don't want to have to dip into savings for things like the mortgage payment, medical expenses or other bills.

Retirement

It's important to keep your life insurance current and consider your future needs. If you haven't already done your estate and legacy planning, this should be a priority.

Other life events that may prompt a review of your life insurance include buying a house, changing jobs, or experiencing changes to your income or debt. It's recommended that you review your life insurance policy at least annually and after any significant life events.

Frequently asked questions