How to Decrease Term Life Insurance

Term life insurance provides short-term insurance protection for individuals and families. A term policy, as it is often called, is free of the longer-term obligations, conditions and benefits of whole life policies, but is a good solution for persons wanting coverage for a pre-determined period of time and/or for the duration of certain life events. On occasion, it may be necessary for you to decrease the amount of your term life coverage. Here are the simplest, most hassle-free ways of doing exactly that.

Instructions

1. Purchase term life insurance for virtually any period of time and any amount you choose--within reason. The company providing the policy may have certain minimums and maximums in place that you have to adhere to, so you need to ask that questions if they do not offer the information first. Term life is a good option if you are single, newly married, starting a family or if you simply cannot uphold the financial commitments associated other types of insurance policies. Many families use a term life policy to cover the payoff of a mortgage in event of the death of one or more of the homeowners. They begin by getting a term life policy for the amount of the mortgage and, subsequently, decrease the policy death benefit as the mortgage balance decreases.

2. Make a list of what you want the coverage to insure and at what points you want to reduce coverage. For example, if your current mortgage balance is $150,000, you would get your initial coverage for $150,000 and make a plan to reduce coverage every $10,000 to $15,000, more or less. Your decision of when to reduce coverage will, to some degree, be dictated by the difference in premiums. You will not necessarily want to go through the process of decreasing coverage if it only means a few dollars difference in premium.

3. Contact the agent who issued the policy to find out what they require to decrease your policy limits. Be sure to clarify with your agent that you do not want any other terms or conditions of the policy to change. Get a quote from your agent to find out what your difference in premium will be at the decreased benefit amount, and to determine whether or not this would be the most effective course based on your goals.

4. Ask questions necessary to get your desired result. Documentation is critical to providing a paper trail and a copy for you records, so you may decide to speak with your agent, or send a letter or email summarizing your conversation. Technology can make it possible for the changes you request to take effect immediately, yet you want to make note of essential facts relating to your transaction, such as the agent's name, date and time of conversation, current policy benefit, decreased policy benefit, date new benefit will take place, current premium amount and new premium amount.

Resources

• National Association of Insurance and Financial Advisors