It allows policyholders to receive all or part of the policy’s proceeds prior to death under certain circumstances, including the need for long-term care and confinement to a nursing home. Because payments may affect tax status and Medicare eligibility, and will be deducted from the overall benefits paid later to beneficiaries, policyholders should thoroughly investigate options in advance.

Medical tests can provide accurate and current information about an applicant’s health, thus enabling insurers to charge premiums that reflect the level of risk an applicant represents. Because some health conditions are easily managed through proper medication, therapy or lifestyle changes, medical information sometimes makes it possible for insurers to cover applicants who might not otherwise be insurable. More serious or incurable conditions present an enormous risk that an insurer simply cannot assume.

Always name a “contingent,” or secondary, beneficiary, just in case you outlive your first beneficiary. Select a specific beneficiary, rather than having the proceeds of your life insurance paid to your estate. One of the great advantages of life insurance is that it can be paid to your family immediately. If it is payable to your estate, however, it will have to go through probate with the rest of your assets. Be very clear in wording beneficiary designations. Naming specific children may exclude those born later. If your child dies before you, do you want the proceeds to go to that child’s children? Changing the beneficiary designation is easy, but you have to remember to do it.

Think twice before you do, because in many situations it may not be to your advantage. Before dropping any in-force policy, make sure your “new” policy is paid for and in effect and first consider: If your health status has changed over the years, you may no longer be insurable at preferred or standard rates. Even if both policies pay “dividends,” it may be years before the new policy’s dividends equal those of your present one. If you replace one cash-value policy with another, the cash value of the new policy may be relatively small for several years and may never be as large as that of the original one. There may also be a period wherein a surrender charge is applicable on the first policy. You should ask for a detailed listing of cost breakdowns of both policies, including premiums, cash surrender value and death benefits. Compare these as well as the features offered by both policies. If you decide to surrender or reduce the value of the policy you now own and replace it with other insurance, be sure your new policy is in force before you cancel the old one.