I was reading a post over a Clarifinancial titled, Can You Own More Than One Life Insurance Policy?
His post got me thinking about the changes that have come about in the the life insurance industry.
Due the their cost structure, Universal Life insurance policies have often been touted as the most flexible life insurance policies. I’m hear to tell you times have changed. The new Whole Life insurance policies that have been rolled out with the updated CSO tables are more flexible. Yes, you heard me right, more flexible than even the Universal Life insurance policies.
One of the ways they have become more flexible is the ability to stack life insurance policies. What I mean by this is if you have the need to increase your insurance with the new Whole Life insurance policies you are able to do so without getting another policy. Universal Life insurance policies have been able to do this since they came out due to the core cost structure. At it’s core a Universal Life insurance policy is annual renewable term insurance. This means that each year the cost of insurance within the policy goes up. It also makes it easy to increase the face amount of the policy because the cost of insurance is determined per $1,000 of coverage.
You use to have to get a whole new policy anytime you wanted to increase the coverage amount of your Whole Life insurance. What this would mean is redundancy in some of the charges that occur to you. Such is the case with term life insurance. In order to increase coverage you need to take out a new term insurance policy. This means selecting the length and amount of coverage. This also means a new policy fee. By stacking policies or adding to existing coverage on the same life insurance policy, you might very well be able to save yourself between $50-$100 or more per year. Not too shabby.
With older Whole Life Insurance policies, you use to have to take out a new policy if you wanted to increase your coverage. This often meant that, and it is not unusual to find, people might end up with 5 or 10 whole life insurance policies. In the old days, you would buy extra life insurance when you insurance guy came around. Buy $10,000 here, $5,000 there, an other $10,000, maybe even a $25,000 life insurance policy. All of a sudden these policies and fees start adding up.
Life insurance agents figured this out and started showing people how they could consolidate their old dozen or so Whole Life insurance policies into one Universal Life insurance policy. Between consolidated fees and rolling over the cash value, people are able to increase their life insurance coverage with little or no out of pocket expense. It’s hard to believe it but it’s true. People are living longer today and the cost of insurance is less than it use to be.
Life insurance companies got smarter as well. They knew that they needed to compete with the flexibility of Universal Life insurance policies. They have definitely stepped up to the plate. The new Whole Life insurance policies usually will allow at least three ways to increase your coverage amount without getting a new policy.
- Increase the face amount of your Whole Life insurance policy
- Add on (or increase) term life insurance attached to your policy
- Add on (or increase) supplemental life insurance attached to your policy
All of this without adding on redundant fees. Keep in mind that anytime you want to increase your life insurance coverage and/or get a new policy you are almost always required to go through underwriting. As I always find, no one wants to increase their coverage more than someone who just got bad medical news. By then it is usually too late.
If you have multiple life insurance policies or are looking to increase your life insurance coverage you should talk with a qualified life insurance professional to go over your options with you. They should be able to do an insurance assessment to determine your best course of action.