Here's a tip from Living Rich by Spending Smart: How to Get More of What You Really Want
The short version on refinancing your life insurance is this: Shop for a good price on term insurance from a reputable company. Sign the papers and take the physical exam. Cancel your old policy. Put the saved money toward something you really care about.
This is exactly the process I've used a couple times to lower the cost of my life insurance. A few more thoughts on this subject from me:
1. It pays to shop around for life insurance -- just like it does for car insurance.
2. Don't buy any more life insurance than you need. Here's how to determine how much life insurance you need.
3. Never, never, never cancel your old policy before you get a new one in place. Otherwise, you may be left hanging if the new one doesn't go through.
4. The "reputable company" is also key. You want to make sure that your insurer is going to be around in case you need them. A great policy that's backed up by a shaky company is not a good deal at all.
5. A couple more worthwhile posts to read on the issue of life insurance include: Life Insurance Advice from Dave Ramsey and What Kind of Life Insurance Should I Buy?
Good post. Only a very few of us need anything but term insurance. And that is affordable to everyone.
Posted by: "Mo" Money | July 16, 2008 at 10:14 AM
I took out my life insurance policy last year and got a return of premium term policy - so once I turn 65 I'll get all my premium money back - pretaxed. I know that I'll stay with this insurance company and they are reputable and this was the best option for me. At least I don't feel like I'm throwing the money away.
Posted by: Jen | July 16, 2008 at 10:27 AM
Yes, yes yes! I absolutely love Dave Ramsey's advice on Whole vs. Term life insurance.
In fact, Is there any way to hit you up to do a comparison of the two on your site lol. Many, many people are unclear on exactly how either policy would benefit them in the long run.
Posted by: ConnieB | July 16, 2008 at 11:51 AM
As a former life insurance saleswoman, I agree term is the way to go. We are in the process of re-doing both of our policies. Mine is in place, but we had to wait until my husband came back from out of the country before doing his policy. Now, he may not qualify for the best rate because his weight is too low (no, I am not kidding.). They are afraid of eating disorder. His only eating disorder is that he eats like we should all eat- grazes all day and makes sure he doesn't overeat. We'll see what happens. I wrote his last policy when we got married, and he was even thinner at that time.
Posted by: sahm | July 16, 2008 at 02:10 PM
With regards to determining what a "reputable company" is for item #4. A.M. Best along with other rating agencies essentially grade each insurance company. AM Best grades the insurance companies based on their financial stability. I wouldn't go with a company that had anything less than an A rating. Especially if you are talking about financial commitments 20 to 30 years into the future.
Posted by: Michael | July 16, 2008 at 03:59 PM
You obviously shouldn't buy more insurance than you "need" to. I'm just confused as to the rules of thumb out there for how much you need. I constantly hear I need 25 times my expenses saved to maintain my standard of living for 30 years in retirement given the safe rate of withdrawl of 4%. Why does my wife only need 7 times my income to maintain her standard of living for 60 years? I guess expenses will be somewhat reduced (food, second car), but I don't eat that much :)
I guess you could assume a second marriage down the road, or that this is "emergency money" and the large drop in standard of living is acceptable after it runs out, but seems kinda silly given how cheap term insurance is to not go ahead and get a lot more. Could anyone help me out on what I am missing? (I admit I have no idea what the payments from social security are when a spouse is lost, maybe this is significant and long-term enough to be the piece of the puzzle I am missing?)
Posted by: Strick | July 16, 2008 at 04:24 PM
Strick --
It's like anything else -- why would you buy more of something than what you actually need? If you don't need it, there are likely better uses for the money.
Posted by: FMF | July 16, 2008 at 04:29 PM
To find a reputable company, check A.M. Best. I recommend going with a company that has an A rating or better.
Posted by: Byron Udell | July 21, 2008 at 11:28 AM