Life changes, (so can your life insurance)

When it comes to life insurance you determine the pay out amount, term length and policy type at the point of application.

But, as we know things in life change, so it's important to review your policy regularly to make sure it still meets your needs.

But are you able to change your existing life insurance if your personal circumstances change?

Can you change your life insurance policy?

Some insurers now enable you to change your policy if your circumstances change.

This is called a special events clause, however, depending on the insurer, it can also be referred to as a guaranteed insurability option or policy increase option.

Please note: some life insurance policies don't allow you to make any changes.

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Why may you need to change your life insurance?

There are many reasons why you may need to change your life insurance policy.

Commons reasons from our experience at Reassured include:

  • Having a child
  • Moving house/increasing your mortgage
  • Getting married or entering into a civil partnership
  • Getting divorced or separated
  • Securing a new job

How much life insurance do you need?

Enter your financial commitments to understand the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.
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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.
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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.
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You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.
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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.
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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.
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Your total cover estimate

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Let us find your best quote.

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How you can change your policy

You can change your life insurance policy in relation to:

  • The cover amount (sum assured)
  • The beneficiaries of your policy
  • Some insurers allow you to divide a joint policy

How much additional cover can you secure?

It's common for you to be able to take out up to 50% of the original cover amount, up to £150,000.

Legal & General[1], for example, allow you to make three special events changes, (but just once for marriages and civil partnerships).

When you change your cover amount, either up or down, your monthly premiums will change accordingly.

Depending on your policy, age and insurer you may need to answer further medical questions to secure the additional cover.

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Can you change your policy term?

No. Unfortunately, you would have to take out a new policy if you needed to extend the length of your cover.

Remember, if you've had a child you'll likely be financially responsible for them for at very least the next 18 years.

And when you consider the average cost of raising a child is £231,713[2] it's clear financial protection would be needed if you were no longer around.

Whatsmore, if you were to buy a bigger house to accommodate your growing family, lengthening your mortgage term, you'll also need to extend your life insurance.

Changing the beneficiaries of your life insurance

When you take out life insurance, any pay out forms part of your estate after you're gone, along with your property and any savings.

Unless you write your life insurance in trust...

Writing your life insurance in trust means the proceeds don't form part of your estate, resulting in three key benefits:

  • Avoid or minimise 40% inheritance tax
  • Avoid the probate process (for a faster pay out)
  • Greater control of your policy, (who receives the money and when)

However, what if you need to change the beneficiaries of your policy. Perhaps you've got remarried or had more children

Well, it depends...

If you have an absolute trust (sometimes known as a bare or fixed trust) these, unfortunately, can't be changed.

However, if you write your policy into a flexible or discretionary trust the named beneficiaries can be amended at the discretion of the trustee/s.

For more information please see our life insurance in trust page.

If you haven't written your life insurance in trust and want to change your beneficiaries you'll need to amend your will.

If you don't have a will then the pay out by default will usually go to your spouse and/or children.

Joint life insurance

Some insurers, such as Aviva and Legal & General allow you to split a joint policy if you become divorced.

This could negate the need to take out a new life insurance policy.

However, you'll need to establish whether this divided policy meets your new needs.

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Can I take out more than one life insurance policy?

Yes, you can take out multiple policies, although this will obviously mean paying multiple premiums.

So, if your current insurer doesn't allow you to make changes you have the option of an additional 'top-up' policy.

For example, maybe you took out a £100,000 decreasing term policy when you purchased your first property.

However, since then you've got married, moved house and had a child. As a result, your existing policy no longer meets your needs.

You could then either take out a level term policy to bridge the coverage gap or perhaps look at a family income benefit policy to protect future living costs.

Maybe you want to look into critical illness cover to protect your family if you're too ill to work.

Cancelling your life insurance policy

On occasions, it may be more beneficial to cancel your no longer suitable policy and take out a new policy.

However, one major factor to be aware of is your age...

If substantially older than when you took out your current policy, your premiums could be significantly higher.

In this scenario, it may make more sense to add an additional 'top-up' policy.

Why not compare quotes (for free) and see if we can save you money each month on your premiums.

Changing your personal details on a policy

When you move home, change your contact details or name you'll need to update your policy.

To do this, you'll need to contact your insurer directly to make these amendments.

If you fall ill

If you fall ill you don't need to change your policy, as the illness didn't knowingly exist at the point of application.

You can still expect your loved ones to receive a pay out after you're gone.

If your illness is terminal and you're given less than 12 months to live, most policies will now pay out before your passing.

These proceeds can ensure you're able to get all your finances in order and offer peace of mind.

Comparing quotes to secure your lowest premiums

We hope this article has helped answer some of your questions regarding changing life insurance.

If you're requiring additional life insurance or critical illness cover we're here to help.

We'll compare some of the leading UK insurers, providing you with your best quotes to choose from.

We can also help you with the application process and write your policy in trust, avoiding 40% inheritance tax.

And the best bit is comparing quotes through our award-winning broker service is completely free.

Why not get in touch and secure your loved ones financial future?

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Sources:

[1] https://www.legalandgeneral.com/life-cover/life-insurance/additional-benefits/making-changes-to-your-policy/

[2] https://themoneycharity.org.uk/money-statistics/51592/

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