Need More Life Insurance Than You Initially Thought? Read This!
You’ve recently purchased a life insurance policy to protect your family, but are now realizing that you didn’t apply for an adequate amount.
We are frequently asked, "Can I add onto an existing life insurance policy?"
Fortunately, this can be an easy fix...if you know the ground rules.
Read on to learn how to recalculate your coverage needs and what the steps are to add more coverage to your life insurance policy.
Quick Article Guide
Here’s what we'll cover in this post:
Recalculating Your Coverage
Most of our clients come to us knowing they "need something," and are anxious to get the ball rolling. During the 4-6 week underwriting process, they'll often take a good hard look at their financial value to their family.
The revised amount is often higher than their initial "enough to pay off the house" assessment. We aren't pushy at JRC. We're glad to provide suggestions and guidelines, preferring our clients come up with their figure. After all, it's your family and budget, not ours.
So what do you do?
The "Easy Fix"
We first need to know how long ago your policy went “in force” (when coverage began) and if your health has changed since that time.
If you’ve had your policy longer than 6 months and your health hasn’t changed, getting more coverage is generally easy. Most life insurance companies will allow you to use the lab results from the previous insurance application.
Life Insurance Coverage Amount
It's important to note that you do need to financially qualify for the increased amount of coverage; life insurers consider the total amount of all policies on your life, and there are limits based on age and income.
If you’re not sure how much coverage you can qualify for, please see our article "Breadwinner's Guide to Income Protection with Life Insurance." Before reapplying, you may wish to review our 8 money-saving affordable life insurance tips.
Option 1: Adding Life Insurance Within 6 Months Of Your Approval
In order to add to your insurance coverage, many clients will “layer," or “stagger,” a new policy on top of their existing policy. It's okay to have multiple policies, as long as the cumulative total falls within insurer guidelines.
We like this strategy, as having multiple policies provides flexibility down the road. If your situation changes and you reach a place in life when you don’t need both policies, it’s easy to cancel one while keeping the other in place.
Let's give an example. Our client, Mike G., bought his first life insurance policy last year when he purchased his first home. Mike is 36 and bought a 30-year term policy to protect his 30 year mortgage in April of 2021. Mike’s mortgage was for $350,000, so he bought a $350,000 dollar policy - just enough for his wife to pay off the mortgage. In July 2021, Mike found out his wife Linda was pregnant…with twins!
Mike immediately called us when he learned of the good news. His first questions to me were:
“I need more life insurance. Can I buy more coverage or add to my policy?”We asked Mike if there had been any changes to his health since he purchased the first policy. He replied, “Nope, maybe just a tad bit more stress.” We shared a good laugh and assured him the additional coverage would be a snap.
“Will I need to take a new medical exam?"
The insurance companies we work with will accept the results of your original medical exam within a 6 month period; some even stretch to 12 months.
Because Mike hadn’t experienced any changes to his health, more coverage for his new family was as simple as completing a new application with me over the phone, and signing a few documents by mail.
Mike’s main goal with his new policy was to provide protection for his children until they were 18 and out of the house. We decided to layer a new 20-year policy for $250,000 on top of his old policy. This would bring his total coverage to $600,000 for the next 20 years, enough to pay off the house and send his children to college.
About the time Mike’s twin daughters are out of the house in 20 years, his total coverage will drop to $350,000 and he will still have more than enough coverage on his life to pay off the mortgage balance, which should only be about $150,000 in 2033.
Mike was surprised to learn that he didn't have to complete a new medical exam and got his new policy approved within a month. It's important to point out that if Mike’s health had changed, the insurance company would not have been able to complete his policy so quickly and may have requested a new medical exam or updated physician's records.
Insurance companies will not offer this “fast track” process to someone who has been recently diagnosed with a health issue, though something short term like a common cold or flu would not be an issue.
Were You Just Approved?
Insurance regulators require that customers receive a 30-day money-back “free look period.” This basically gives you 4 weeks to review your policy with your family, agent, and financial advisor to verify it’s the correct fit for your needs. If you change your mind and cancel your policy within this period, any premium payment will be fully refunded.
If your policy was just approved and you realize you need more coverage; call your agent immediately and ask them to check with the underwriter to see if they could approve more coverage without a new medical exam.
Depending upon the amount, the answer is generally "yes." However, additional test(s) could be required.
For instance, many insurance companies require an EKG if applying for more than $1 million at younger ages, or $500,000 at older ages. Because of this, we highly recommend placing your approved policy in force before asking for more coverage.
If you have a new test before your initial policy is activated, and there are questions about the results, your initial offer can be pulled.
We've seen this happen numerous times - with additional tests, such as a cardio “stress test,” being required at the applicant’s expense if anything comes up on an EKG. A stress test can run $1,500-$2,500, and usually isn't covered by health insurance unless you're experiencing symptoms. And if you're "experiencing symptoms," it's likely too late to qualify for anything than a minimal amount of life insurance.
Insider’s tip:Remember, doctors look at us today...insurance companies assess risk over time; so don’t be surprised when they don’t see eye to eye. If doctors can't fix or medicate a problem, they may not even tell you about it! Rather than worry you, they may go with the common line "Go home, you're fine...see you next time" (hopefully!).
Option 2: Adding Life Insurance Coverage More Than 6 Months After Initial Approval
If your existing life insurance was approved more than 6 months ago, you may be able to purchase additional coverage if your health hasn't changed much. If this is your situation, we normally recommend reapplying for the total amount needed.
Let’s say you currently insured for $300,000, but you need $500,000. Instead of applying for a $200,000 dollar to policy to layer onto your existing policy, you can apply for the full $500,000 of coverage to take advantage of term life insurance price breaks occurring at 250k intervals. When you speak to our agents, have them show you the cost differential and decide what's best.
When your new policy is approved, you will have the option of replacing your old policy with your new policy if you qualify for a better rate. If you do not qualify for a better rate, you still have the ability to reduce the amount of coverage from $500,000 to $200,000 and layer this policy on top of your existing $300,000 policy. This process will ensure that you receive the best value for life insurance that you can qualify for.
What If My Health Has Changed?
If your health has changed since you purchased your last insurance policy, you could be required to compete a new medical exam regardless of when your previous policy was approved and placed in force. This must be disclosed in a "Good Health Statement.”
Not admitting to changes to your medical health is considered insurance fraud, so don’t be tempted to hide the truth. The last thing you’d want is to die and your death claim denied because you lied on an insurance contract. That’s not the legacy any of us want to leave behind.
We’ll look out after your best interests - both for protecting your family and your wallet. We are here to help you save money on your life insurance. Let us earn your business...for life.
As a non-partial, no-fee brokerage, our goal is match our clients with the best life insurance options available by shopping and comparing rates from more than 50 highly-rated insurers. By having access to dozens of companies and their guidelines, we’re able to save our client’s time and money.
Give us a call today, we would love to help! Toll free: 855-247-9555, or request a free quote here.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.