10 April 2012 0 Comments

Re-Applying For A New Term Policy At The End Of Your Term Duration

This is my third blog on what you can do at the end of your Term Policy’s duration—assuming you want to continue coverage.  I’ve talked about conversion and keep paying the escalating term premiums.  Here’s the final option:  Re-apply for a new policy.

Applying for a new policy might work, but how do you know you’ll be able to qualify? Even if you’re young enough to still be eligible for Term Life Insurance, you have to go through the entire underwriting process all over again to qualify for a new policy. During this process, the insurance company will provide you with a medical exam, obtain your medical records, and request information about your family’s medical history.  They’ll also investigate your lifestyle, keeping an eye out for any dangerous avocations or occupations; drug, alcohol or nicotine use; criminal and driving records; and financial responsibility. All this goes to show that you may not necessarily qualify for a new policy. If you do, you may find yourself in a higher premium class than you were in when you obtained the original policy.

If you  decide to apply for a new policy start the process at least two months prior to the end of your term period, and don’t stop paying premiums on your current policy until the new one has been issued. Here’s a real case in which one of my brokers was involved that points up how important this can be:  The applicant for life insurance owned a term policy that was coming to the end of its 10 year term.  He had qualified in the best preferred category, but the original agent had not stayed in touch with him, so my broker was called in.  Even though this new broker informed the applicant to keep the old policy in force until underwriting was completed on the new application, he stopped paying premiums.  He told the new broker that he was in perfect health and there would be no trouble qualifying for a new policy.  When the new policy was issued, it was rated up 4 tables with a premium more than double what he had been anticipating.  The rating was due to abnormal liver function detected in the blood drawn for the new insurance company.  By this time the grace period on the original term policy had expired and the applicant was so irate, insisting that the insurance company had confused some other applicant’s blood with his, he refused to bind the new company by paying once month’s premium.  He would visit his own doctor to prove that the new insurance company had erred.  Well, they had.  If they had known the full story they would have declined the application due to active liver cancer that had not been detected.  The table 4 offer was withdrawn.  The application was declined and was dead in 8 months from the liver cancer with no insurance in force.         

You should also be aware that any new policy will contain a new suicide and contestable period. This means that for the first two policy years, the face amount will not be paid if your death is proven to be the result of suicide or you materially misrepresented or concealed important information on your application. Instead, the premiums paid will be refunded. Once those two years are up, however, the claim must be paid – even in the event of suicide or misrepresentations on your application.

Coming Up Next: How to Get the Best Term Premiums

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