What happens to life insurance if you move to a different company?
A lot of us tend to chop and change insurance without much thought for what the impact that this decision has on our cover and our premiums. When it comes to household insurance, this is not such a big deal. When it comes to a retirement annuity, it may be possible to transfer the funds over to the new policy but when it comes to life insurance, you will lose all the money that you paid into it.
You Could Lose out in a Big Way
Some life insurance have a savings component in them and this means that, as time goes by, they acquire a cash value. This generally builds up after the policy has been in place for about two to three years. Should you cancel your policy, the cash value will be paid out and you will have to start all over again. This could prove to be a problem in future. You might not think that a cash value is important but it can be when you want to take out a loan and need some form of collateral. Of course, not all policies have a savings component. In this case, the money that you have paid into the policy will be lost completely should you cancel the policy.
You Could be Risking more than you Realize
If you cancel your existing policy in favour of a new one, you could be risking not being covered – most new policies have restrictions in terms of what they cover and there are generally waiting periods for new policy owners when it comes to pre-existing conditions. If, for example, you have a heart condition, you may find that you will not be covered should you die of a heart attack within the first couple of years. It may not be worthwhile switching to a new company if these restrictions come into play.
You aren’t Getting any Younger
Another risk you run is that you are more likely to fall prone to lifestyle diseases as you age. Not only will your increased age be a factor when switching companies, you will no doubt have to go for another medical physical checkup. Should your health have deteriorated since you got the first policy, you could end up paying a lot more than were or might have to settle for less cover. On the other hand, if you have cleaned up your lifestyle and are healthier than you were when you took out the first policy, you could end up saving a fair amount of money.
In general, you should seriously consider all the pros and cons before you opt to change your life insurance to a new company. That said, you also need to take cognizance of the fact that the insurance industry is a highly competitive one and that companies are constantly making improvements to what they have on offer. You really should review your life insurance at least once a year in order to make sure that your policy is really the best that is out there.