Is it possible to have too much life insurance?

A life insurance policy is there to protect you through all of life’s changes, and it’s meant to be with you for the long haul. Term life insurance lasts anywhere from 10 to 30 years, and a permanent policy lasts your entire lifetime as long as you keep up with the payments. But a lot can change during that time.

You might no longer have kids depending on you, or you might have paid off the house. If you bought life insurance for those reasons, does it make sense to reduce your coverage? And will reducing your life insurance policy help you save money on rates?

Here’s what to know about when to reduce term life insurance coverage

Should I reduce my life insurance coverage?

Before you make big changes to your life policy, consider your options carefully. Life insurance provides critical protection for your family in case of the unexpected. You don’t want them to be underinsured if the worst happens. After all, this is money that they are counting on to pay their bills, pay the mortgage, cover debts, and more.

At the same time, there’s no sense in overpaying for coverage. If you have way more life insurance than you need, those excess premium payments could be going toward emergency savings or another goal. Reducing your policy, instead of canceling it completely, lets you count on the protection life insurance provides and also potentially lower your costs.

Deciding how much coverage you really need? Here are a few factors to consider:

• Have I calculated all of my current and future financial needs? Life can be full of unexpected surprises. Make sure to plan for enough life insurance coverage for everything you know is on the horizon and a little cushion for those unknowns. If you’re past your family-raising years, you might not need to think about providing for an extra child, but life changes like an elderly parent moving in with you or the illness of a partner can incur some unexpected costs. A common rule of thumb is seven to 10 times your income, but the right amount is different for everyone. Use our life insurance calculator to crunch the numbers for you and your family.

• How much money will I save? Most people reduce their life insurance coverage not because they want less coverage, but because they want to pay lower premiums. Consider how much reducing your life insurance policy will save you. The additional cost depends partly on how much time is left on your policy, as well as your current and desired coverage amount. Term life insurance is already less expensive than most people think, so the amount you save on life insurance premiums might not be worth the lowered protection, especially if you just have a few years to go.

How can I lower my coverage with my insurer?

Reducing the amount of life insurance coverage you have is usually not a big deal. Many insurers will let you make a change to your policy at least once during the life of the policy. Most policies have a minimum amount of coverage, so you will need to at least maintain that amount. For example, our RAPIDecision(R) Life insurance has a minimum coverage level of $50,000.

If you do reduce your plan, be sure you really want less coverage for the remainder of your policy. Increasing your coverage is more complicated and usually involves reapplying and taking a medical exam. Also, if you run into health issues between now and then, it could impact your eligibility and rates.

What happens to my premiums if I lower my coverage?

That depends on your insurance company and how much you lower your life insurance coverage. An agent can help you understand the impact on your life insurance rates.

Still have questions about reducing term life insurance coverage?

We’re here to help. Fidelity Life offers a wide variety of products to support people at every stage of life. Get your quote online today or call one of our agents at (855) 291-6365.

At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.