How to Increase Premium Term Life Insurance

Increasing premium term life insurance allows you to purchase term life insurance with extremely low premiums to start out. These policies are also called "annual renewable term life." Life insurance is designed to protect your family from your financial obligations if you die before those obligations are paid off. Because of its cost, many individuals opt for inexpensive term life insurance. But, what if your obligations increase over time? You'll need to know how to increase your increasing premium term life insurance. This will come with increased premiums, of course, but will provide adequate coverage for you and your family.

Instructions

1. Examine your existing policy for a guaranteed insurability rider. If you have this rider, you can purchase additional insurance at specified times without submitting another application and going through full underwriting.

2. Contact three to four life insurance companies if you need to purchase a new policy. You may wish to keep doing business with your existing life insurance company, but it's always good to get additional quotes.

3. Apply for additional coverage by submitting an application with your modal premium (first month's premium payment). Consider purchasing insurance that is "banded." Banded insurance offers break points where, if you purchase enough insurance, the insurance becomes cheaper. This can be compared to buying food in bulk at a warehouse grocery store. The more you buy, the cheaper the unit cost is. Typical price breaks for banded insurance often happen when you buy $100,000, $250,000, $500,000 and $1,000,000 worth of insurance.

4. Go through underwriting. You will need to schedule a time to have a physical exam. These are required by most insurance companies when purchasing additional coverage. How extensive the underwriting is will depend entirely on the amount of insurance you are buying.

5. Convert your existing policy. Another alternative to purchasing additional increasing premium term life insurance is to purchase level premium term life insurance. This type of insurance can also be purchased relatively cheaply and can offer you the benefits of term life without the increasing premium costs over time. Many increasing term policies can be converted to either permanent or other term policies.

References

• Life & Health Insurance, License Exam Manual, 6th Edition; Dearborn Financial; 2004
• "Ernst & Young's Personal Financial Planning Guide, 5th edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004
• "Practicing Financial Planning for Professionals, practitioner's 10th edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007