How to Increase Term Life Insurance Policies
As your life changes, so do your life insurance needs. Major events like marriage or the birth of a child typically result in the need for additional life insurance coverage. If you already own a term life insurance policy, you may be able to have your death benefit increased without purchasing a completely separate policy.
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Instructions
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Determine how much additional life insurance you want. There are many ways to arrive at an appropriate amount, and the easiest is a simple rule of thumb -- multiply your annual income by the number of years you want to provide that money to your beneficiaries. According to Jeff Rose, a Certified Financial Planner from Illinois, "As a general rule of thumb, it will be a multiplier of your current income based on your age."
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Get the Face Amount Increase request form from your current life insurance carrier. This is a standard form that all insurance companies can provide. You should be able to obtain this form from the company's customer service department, or on the life insurance company's website.
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Complete the Face Amount Increase request form in its entirety. Be sure to accurately and truthfully answer all questions on the application to avoid delays or confusion later. The request form may closely resemble the health questionnaire section of your original policy application.
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Return the request form to the insurance company's In Force policy department. Your paperwork will be processed and your death benefit increase will be considered by underwriters in much the same way as your original life insurance application.
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Get a medical exam. Almost every face amount increase will require a new medical exam, unless your current term life insurance policy is relatively new. Increasing your death benefit is viewed in much the same way as any brand new application for insurance, and your present health condition will play a major role in determining your new premium. According to InsureNet.com, "If you want to increase your death benefit, you may have to provide medical proof that your health has not deteriorated."
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Tips & Warnings
Ask your life insurance company to compare the cost of increasing the death benefit of your existing term policy with the premium for a new policy. Many companies decrease term insurance rates every few years, or create new products with lower expenses, and there is the possibility that a brand new policy may cost less than the one you already own.
Some life insurance companies will initiate a new Contestability Period after a death benefit increase. The Contestability Period is the two years immediately following the purchase of a life insurance policy or an increase in the death benefit of an existing policy. If you die during this period, the insurance company may investigate your death to search for any evidence of fraud. If it is determined that you lied on your application, or otherwise knowingly concealed vital information, your death benefit will not be paid.
