The big craze lately has been the vast number of people rushing to refinance their home loans and I have been excited to be a participant in this craze!
We finished building our dream home in February of 2008, and we were extremely excited to lock into a 30-year mortgage at 5% interest.
We were even more excited when just seven months after the fact, we refinanced to a 20-year mortgage at 4.25%.
After this initial mortgage refinance, I never thought I would be able to refinance again until lo and behold – mortgage rates dropped again! We were able to refinance for a second time recently at an amazing 15-year, 3.375% mortgage rate.
We were ecstatic!
I am all about saving money, especially when it doesn’t take a lot of work – and making a phone call, signing a form here and there; in my mind, is all worth it in the end.
But if I wasn’t aware that mortgage rates were down, I never would have thought to check into refinancing to try and save money. The same is to be said about life insurance.
If you haven’t seen it, I wrote a post that talks about life insurance, called “How much life insurance do you need to buy?” I originally wrote that article in 2009, around the same time that our second son had arrived.
Can You Really Refinance Your Life Insurance?
I recently updated the article when our third son arrived and I purchased additional life insurance (you can see the updated version at the bottom of the post). The most recent time I bought life insurance, I bought a third term policy for a total of $1.5 million; and that brought my total term life insurance coverage to $2.25 million. And just like when I purchased my original home mortgage, I never thought that:
- A) I would ever buy life insurance again;
- B) That I could ever lower my life insurance premiums.
It is safe to say that refinancing your life insurance is not a common thing to do, but it can be done. Just out of curiosity, I filled out a life insurance quote engine (the one now on my site) to see how much money I could save if I refinanced.
I was surprised to discover I could get $250,000 more coverage, bringing my total life insurance coverage to $2.5 million – and in the process, save over $400 a year.
I almost didn’t believe it. I had to run a secondary quote engine just to double check my findings.
Sure enough – it was true!
I immediately submitted the application, and went through the questionnaire to complete the process. While I estimated that refinancing my mortgage has saved me roughly $219,000 over the life of the loan, and refinancing my life insurance won’t offer savings that great, it is still a decent amount, especially if you figure I was going to be paying on the life insurance for the 30-year term that I took out.
By saving $400 a year x 30 years that adds up to $12,000 saved. If you then figure I could invest that $400 a year into an investment that pays 7%, it would net me that much more. Not a bad little lump sum for making a phone call, filling out some paperwork and going through another insurance medical exam.
A Few Things to Consider Before Refinancing Life Insurance
In my situation, I have three term policies. On each of these three policies, we pay annually and physically write a check to the insurance company. When I discovered life insurance could be refinanced, it was convenient to the time when my $1.5 million policy was coming due and that is what prompted me to go through this process. I was trying to get everything done before the termination date, but unfortunately I hit some snags.
I wanted to make sure that I didn’t lose any insurance coverage in the process of refinancing so we called the insurance company to find out how it works. It turns out that we can go ahead and pay the policy; once we cancel it, we can get a refund for the pro-rated amount; this put my wife and I at ease as I finished up completing the bigger process.
The other two policies will stay in-force, as they were a smaller amount, and we will just let them expire on the next renewal date.
One last thing to consider without any doubt, do not cancel your policy until you get approved for the new one. It would be an unfortunate circumstance to let the policies lapse only to find out that you have some medical condition that you did not know about that prevented you from getting the new insurance.
If you are looking to refinance your life insurance, be sure and check out the life insurance quote engine to make it easy; you can get a quote in less than 3 minutes and be on your way to saving yourself some money.
And if you don’t have any life insurance, find out out how cheap it really is by getting a quote today.