Can you reduce the coverage amount on your term life insurance policy?
You can often reduce the coverage amount on your term life insurance policy, or modify your policy in other ways, though it depends on your insurance company. Learn about how reducing your coverage amount might change your term life insurance policy.
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Travis Thompson
Licensed Insurance Agent
Travis Thompson has been a licensed insurance agent for nearly five years. After obtaining his life and health insurance licenses, he began working for Symmetry Financial Group as a State Licensed Field Underwriter. In this position, he learned the coverage options and limits surrounding mortgage protection. He advised clients on the coverage needed to protect them in the event of a death, critica...
Licensed Insurance Agent
UPDATED: Nov 27, 2023
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Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Nov 27, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
Life brings about unexpected changes, both good and bad, and it’s unrealistic to think that setting up life insurance in your early years means you’ll never need to change it. But, on the other hand, you might reach a point where the policy you initially bought is too excessive, and you no longer require such a large amount of life insurance.
Are you able to lower your life insurance coverage? The answer will depend on your insurance company. This article will explain what to expect if you can have multiple life insurance policies. and what limitations you might encounter.
Read more: Can you have multiple life insurance policies
Can I reduce the face amount of my term life insurance?
Most insurance companies will allow you to modify your life insurance policy, whether to increase or decrease coverage. However, there might be some time and frequency limits on how often you can request for changes to be made. There might also be a minimum amount you’ll need to maintain.
When signing up for term life insurance, make sure to find out if your insurance company will allow you to change your coverage amount later. Also, ask about any restrictions that may apply.
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Will I be required to take another paramedical exam?
Increasing your death benefit will almost certainly require a new paramedical exam, but decreasing the life insurance policy usually doesn’t. However, some insurance companies will require you to start an entirely new policy if you wish to reduce coverage. You’ll need to go through the entire application process, including the paramedical exam.
If this is the case, your new policy will be rated based on your current information instead of your parameters at the initial application. Therefore, keeping the old policy with a higher face amount of life insurance might be more cost-effective than getting a new reduced one.
What will be the revised rate?
Cutting your life insurance benefit in half doesn’t mean that your rate will be halved as well. Your insurance rate is calculated based on two amounts: the policy fee, which is usually $50 to $100, and the cost of insurance, which depends on the size of your policy.
Therefore, you can expect your insurance rate to go down if you reduce the coverage, but the calculation isn’t as straightforward as it might initially seem. Your insurance company will be able to give you the exact rate you will pay if you decide to decrease your death benefit.
Decreasing Term Insurance Policies
There are three main types of life insurance policies: decreasing term, level term, and permanent life insurance.
Decreasing term life insurance provides coverage for a set period of time. For example, if you pass away while the policy is active, your beneficiaries will receive a payout from your policy. This payout gets reduced over time, but the upside is that the rates are more affordable than with other policies. The decreasing term policy is usually used if you need to repay a debt, for example, a mortgage or a business debt.
If you choose level term insurance, your premiums and death benefit will remain the same from the day you sign up until payout. On the other hand, permanent life insurance offers lifelong coverage that never expires. While term insurance is the right choice for most families, a permanent policy might be a better option if you or your family member are disabled or require long-term medical care.
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Exploring Case Studies: Reducing Term Life Insurance Coverage
Case Study 1: John’s Insurance Modification With SecureLife Insurance
John, a policyholder with SecureLife Insurance, wanted to reduce the coverage amount on his term life insurance policy. He contacted SecureLife Insurance and inquired about the possibility of modifying his policy. SecureLife Insurance informed John that they allowed policy modifications, including decreasing the coverage amount.
However, there were certain limitations and restrictions to consider. John decided to proceed with reducing his coverage and worked with SecureLife Insurance to make the necessary changes.
Case Study 2: Sarah’s Policy Revision With Guardian Insurance
Sarah held a term life insurance policy with Guardian Insurance. Over time, Sarah’s financial situation improved, and she realized that her current coverage amount was excessive. She contacted Guardian Insurance to inquire about reducing her life insurance coverage.
However, to her surprise, Guardian Insurance informed her that they did not allow reductions in coverage. Instead, they advised Sarah to consider starting a new policy with a lower coverage amount.
Sarah weighed her options and decided to keep her existing policy with Guardian Insurance, considering the potential costs and implications of starting a new one.
Case Study 3: Mark’s Revised Rate With SecureShield Assurance
Mark had a term life insurance policy with SecureShield Assurance, and he wanted to decrease his coverage to better align with his current needs. He reached out to SecureShield Assurance and requested a revised rate for his policy.
The insurance company informed Mark that reducing the coverage amount would result in a lower premium. However, they explained that the rate reduction would not be proportional to the coverage reduction.
Mark received a detailed quote from SecureShield Assurance, providing him with the exact rate he would pay after decreasing his death benefit.
Final Thoughts on Reducing Term Life Insurance Coverage
While decreasing term policies might sound like a good idea, there is an important downside to consider. Reducing your term life insurance might leave your family with less coverage than they need. Plus, the difference in your monthly premium might only be a few dollars, so it might not be worth reducing your coverage.
Read More: What is level-term life insurance?
Frequently Asked Questions
Can I reduce the coverage amount on my term life insurance policy?
Yes, you can often reduce the coverage amount on your term life insurance policy, but it depends on your insurance company. There might be limitations and restrictions involved, so it’s important to check with your insurance company regarding their policy on modifying coverage amounts.
Will I be required to take another paramedical exam if I want to decrease my life insurance coverage?
Generally, decreasing the coverage amount on your life insurance policy doesn’t require a new paramedical exam. However, some insurance companies may require you to start a new policy with a reduced coverage amount, which would involve going through the entire application process, including a paramedical exam.
What will be the revised rate if I reduce my life insurance coverage?
The revised rate for your life insurance policy after reducing the coverage amount might not be a straightforward calculation. Your insurance rate is determined by factors such as the policy fee and the cost of insurance, which depends on the size of your policy. It’s best to consult your insurance company to get the exact rate you will pay after decreasing your death benefit.
What are the types of life insurance policies available?
There are three main types of life insurance policies: decreasing term, level term, and permanent life insurance. Decreasing term life insurance provides coverage for a specific period, with the benefit reducing over time. Level term insurance offers consistent premiums and death benefits throughout the policy term. Permanent life insurance provides lifelong coverage that doesn’t expire.
Should I consider reducing my term life insurance coverage?
While reducing your term life insurance coverage might seem like a good idea, it’s important to consider the potential downside. By reducing your coverage, your family might be left with insufficient protection. Additionally, the difference in your monthly premium might be minimal, making it less worthwhile to reduce your coverage. Evaluate your needs and consult with your insurance provider before making a decision.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Travis Thompson
Licensed Insurance Agent
Travis Thompson has been a licensed insurance agent for nearly five years. After obtaining his life and health insurance licenses, he began working for Symmetry Financial Group as a State Licensed Field Underwriter. In this position, he learned the coverage options and limits surrounding mortgage protection. He advised clients on the coverage needed to protect them in the event of a death, critica...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.