Term life insurance provides funds for your family or designated beneficiary after you pass away. The coverage is offered for a specific period of time, such as 20 years. You should review your life insurance needs whenever you have life-altering events, such as the birth of a child or a change in job status, or when your financial obligations change. You can reduce term insurance by modifying your existing policy or by canceling your policy and replacing it with new life insurance coverage.
Step 1
Calculate the value of term insurance you require. Include the cost of your funeral, funds to help pay off your debts and money to assist your family with ongoing living expenses. For example, if you have children who are about to finish college, your life insurance needs are often less than if your children are toddlers. Contact an insurance agent or use an online life insurance calculator to determine the amount of life insurance that best fits your situation.
Step 2
Compare your current life insurance coverage level to your calculated need. If the drop in your coverage needs is not significant, your savings by lowering your existing coverage may be minimal. Evaluate the time until your term policy expires in relation to your anticipated savings to determine whether you want to proceed with a term insurance reduction.
Step 3
Contact your life insurance company. Ask about your options for reducing coverage. You may face a penalty for early termination or may be required to cancel the policy, but most reductions will simply result in a lower premium. Request policy quotes for all reduction options.
Step 4
Obtain quotes from other insurance companies. You can use an online quote service or contact insurance agents directly for policy pricing and options. Evaluate all the quotes and options to determine the most economical method of reducing your term insurance.
Step 5
Complete the required paperwork for your term insurance reduction. Obtain a insurance reduction request form from your existing company to lower the value of your current policy or a policy cancellation form for a termination. For a new life insurance policy, you'll probably fill out an application that includes background information, family information, health questions and a demographic profile. A new policy will often require that you undergo a medical exam.
Step 6
Ensure that your reduction was processed correctly. Review any confirmation documents or your statement, or call your insurance company for verification.
Tips and Warnings
- Don't cancel an existing policy before a new policy is in place.
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