When Reapplying for Life Insurance Can Be a Bad Idea
Other than being young, getting healthy is one of the best ways to find better life insurance rates. Moving up in rate classifications from a standard to preferred rate can save 15-20 percent in premiums by losing weight, having good blood pressure, low cholesterol and being in overall good health.
Stopping smoking can also save a lot of money on life insurance, with smokers regularly paying triple what a non-smoker would for the same insurance.
But reapplying for lower life insurance rates isn’t easy. There’s a medical exam to take, and it can take three years of not smoking to prove you’re no longer a smoker. But if you do improve your health and qualify for lower life insurance rates, the savings can make all of that extra work worthwhile — along with the bonus of feeling healthier.
“If they get their health in shape and they get retested, they can get better rates when reapplying” for the same policy, says says Jeff Wald, a life insurance agent at Shelter Insurance in Portland, TN.
There’s one factor, however, that can make reapplying for a lower premium not worthwhile: Getting older.
“You don’t want to wait too long. You may be healthier, but you’ll be older,” Wald says.
You might be able to lose weight, but you can’t escape aging. If you bought a life insurance policy when you were young, it might be cheaper to keep the low rate and not reapply if old age pushes you to a higher rate classification. Even getting a new policy can be more expensive as you age, even if your health improves, says Derek Helm, a former life and health insurance agent in California.
“The rates are based of of your health and age,” says Helm, who now works in dental marketing. “If your health improves, you can move up in health classifications, but you can’t get reverse the rate for your age.”
If you have a “guaranteed renewable” term life insurance policy, then you can renew it when it ends no matter what your health conditions are.
If your age pushes you into a higher classification, it might be cheaper to apply for a new life insurance policy instead of reapplying for a new one.
And if you do get rid of an old policy and get a new one at a cheaper rate, you should keep the old one until the new policy takes effect, Wald recommends.
For people 55 and older, it may not make sense to change policies if their current policy is accumulating cash value, says Don Chamberlin, a certified financial educator and founder of The Chamberlin Group, a holistic financial advisory firm in St. Louis.
If you decide to improve your health and plan on reapplying for lower life insurance rates, check with your agent on how much savings you’ll get and if your increased age will negate the savings. It may not, but if you’re 55 or older it’s worth checking on.
Also be aware that not all life insurance companies classify health conditions the same. One carrier may be OK with someone having high blood pressure, but it will charge diabetics more. Even if you can lower your blood pressure, one insurer may offer you a discount while another may not and may require more health improvements before moving you to a better classification.
And if your doctor does tell you lose some weight and improve your health, don’t ignore it. Chances are that they, just like you, are thinking more about your longterm health than a lower insurance premium.
Aaron Crowe is a freelance writer who specializes in personal finance topics including insurance, real estate and kids and money. Follow him on Twitter @AaronCrowe or find him on his website, AaronCrowe.net.
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