Replace your Life Insurance Policy?

Switching life-insurance policies can sometimes save you money. But don’t jump without looking carefully. It’s often a bad idea to cancel a cash-value, “whole-life” policy. True, these policies carry high premiums, and agent commissions aren’t cheap either. But if you cancel one, you’ll have little to show for years of financial sacrifice. That’s because it usually takes five years or more before whole-life policies build any significant cash value.

If the policy’s premiums have become too much of a burden, your insurance company may offer a conversion to a term policy under better terms than if you merely canceled. Policy replacement is much simpler with term policies, which don’t build up any cash value. But even there, don’t be swayed by lower rates alone. Remember that you’ve already paid acquisition costs for your existing policy. If you have to pay them again, will the new policy still seem like such a good deal?