Why You should think Twice before letting your Life Insurance Lapse
You should think twice before letting your life insurance lapse. There are several reasons for this. First let’s discuss the factors that apply to the pricing when you are initially getting your life insurance policy. Once we discuss these, it will be clearer to you as to why you would want to think twice about letting your policy lapse.
When you first applied for your life insurance the price was determined, partly, by your age at the time of the application and your gender. The pricing is also based on your height and weight. At the time of the application, a medical exam was ordered and an examiner came to your home. Likely, they took your blood pressure, pulse, and got some medical history from you. Those results went directly to the insurance company.
Once received by the insurance company, your results were reviewed along with all the information on your application. You would have had to also disclose your occupation and whether or not you traveled out of the United States /Canada and if so, when you did this, where did you go and for how long of a time period. This is considered on your life insurance application as your travel history. The life insurance carrier would also have checked your driving record. Your driving record can be another factor in the pricing of life insurance, as excessive speeding tickets and/or DUI’s could raise the price.
If you answered ‘yes’ to anything on the health portion of the application, the carrier would have ordered your medical records from your physician. Once these are received, they would be reviewed and use this information to help determine the price on your life insurance policy.
Now after outlining the steps it took to get your policy in place, let’s look at what would happen if you were to let this policy lapse. A lapse can affect you when you are trying to get a new policy or if you are trying to have the lapsed policy reinstated.
Let’s go back to the first few items above, the first, being your age. You would now be older, so this would be a factor with pricing if you were trying to get a new policy. Also if your weight is more than it was when the original life insurance policy was written, you could pay a higher rate. Your current overall health is another factor that could even prevent you from reacquiring coverage. It is not often that your health gets better with age.
Did you know your occupation can prevent you from getting coverage again? There are occupations that are considered more high-risk than others. This could change the price similarly, in the same manner foreign travel and other risky hobbies can affect pricing or even potentially exclude you from coverage. If you travel to higher risk countries, this could definitely change the price or could prevent you from getting a new policy.
About the author: Pam Fortier has been in the life insurance business for over 30 years. She also holds both a LUTCF designation and a CISR designation. Pam is adept at helping clients select the coverage they want at the price they can afford. You can contact Pam at 1-800-651-1953 or PFortier@Pivot.com.