Read This Before You Replace Your Existing Life Insurance

Should You Replace Your Life Insurance Policy?

life ensurancePerhaps you have read or been told that your existing life insurance is old-fashioned. It’s tired and should be turned in. Try not to be misled by glib talk about replacing of existing life insurance. Read this article posted on the blog.

Replacement of life insurance is a substantial problem and really should be performed only after much analysis and consideration -not simply as a result of simple choice to update or become more modern.

Whenever you switch a present life ensurance policy, you cancel your existing policy with one provider and initiate another life insurance policy, either with similar company or with a different agency. If a person suggests you to eliminate an old policy and buy a new one, and does not reveal to you the rate of return in both scenarios, it’s as though doctor wrote out a prescription without first examining you or asking specific questions.

At this point you need to understand that whenever it comes to life insurance cost disclosure, the strategy I suggest is the rate-of-return method. Not being mindful of the rate of return on your life insurance is similar to not being aware of what amount of cash you have in your savings and checking accounts, the existing market value of your property, or the amount of your outstanding mortgage.

When confronted with a present policy, rate of return is more important than other cost-disclosure measures for the following factors:

1. The standard method ignores the time value of money and for that reason is not a valid method.
2. It is often my knowledge about most ensurance companies that the interest- adjusted index is not indicated on an in-force ledger statement. Even if it were, the numerical figures shown must be exactly the same numerical figures shown on the original ledger statement used at the time of purchase.

If, in fact, a particular agency indicated the interest-adjusted index on an in-force ledger statement and the numerical figures were not the same, this may be deceptive because it could be ignoring the period of time for which the current policy had been in effect.

If you can have the same amount of life insurance for less money than you are currently paying, or more insurance for the same amount of money, then you should consider replacing your existing life insurance. An increase in the rate of return to the beneficiary, to you yourself (the insured), or to both is what you will probably be interested in. However, an increase in the rate of return to the beneficiary is usually what you could realistically be prepared to achieve. The rate of return to you personally cannot usually be increased due to acquisition costs involved in buying a new policy (e.g., commissions).

The rise should be no less than 1 % compound. If the rate of return to your beneficiary, upon your death, cannot be increased a minimum of 1 percent compound, forget about replacing your existing life insurance.
In-Force Ledger Statement. Where do you start, once you attempted to determine the rate of return of a current ensurance policy? The first thing you should do is request from the insurance company an in-force ledger statement for the policy presently in force. When the in-force ledger statement may be obtained, then your rate of return, both for you and for your beneficiary, could be calculated. Other pertinent information can also be given.

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