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Replacing a life insurance policy means you’re buying a new life insurance policy and plan on terminating your current policy or letting it expire. Replacing a life insurance policy isn’t unheard of.

9 reasons why people replace their life insurance policies with a new plan:

  1. Your current term life insurance policy is expiring and the premiums will increase if you renew it.
  2. You had a baby and now need more coverage.
  3. You bought a new home and have more debt.
  4. You are retiring.
  5. You found a cheaper policy.
  6. You quit smoking or using tobacco.
  7. Your health has improved since you purchased your current policy.
  8. You have remarried.
  9. You have a term life insurance policy that doesn’t have living benefits.

Before replacing a life insurance policy, there are a few key points to consider.

Renewal and Conversion Options

If you have been diagnosed with a serious illness and your term life insurance policy just won’t cut it, check if you have renewal or conversion options. If you are diagnosed with a chronic or terminal illness, it’s possible that you are no longer insurable for a new traditional life insurance policy.

A Quotacy agent can review your options with you, even if you didn’t purchase your current policy from us. If you’re now uninsurable, renewing or converting your current policy may be the best option. If your current policy doesn’t have these options, a Quotacy agent can discuss other options that may be available to you.

You May Need a New Medical Exam

When you purchased your current life insurance policy you likely underwent a medical exam. If you’re looking to replace your current life insurance policy, you’ll need to get a new medical exam. If you’ve developed a medical condition or have gotten into any legal trouble (e.g. driving violations) you may not qualify for a cheaper policy. There’s also a chance you may now be uninsurable, so be sure not to cancel your current policy until you have a new one in place.

Depending on your age and the coverage amount you’re seeking, you may have the option to skip a medical exam. Life insurance companies are working to make the buying process less complicated and that includes eliminating a medical exam when it makes sense.

Your Waiting Periods Start Over

Life insurance contracts include a contestability period, typically two years, during which, if the insured dies, the insurance company has the right to contest the claim based on any misrepresentations made on the application. When a policyholder replaces a policy, that contestability period starts all over again.

The same happens with the suicide clause. Most life insurance contracts include a suicide clause which allows the insurer to deny a claim if the insured’s death is caused by suicide within the first two years. This time period starts over with the purchase of a new policy.

If you’re replacing a permanent life insurance policy that accumulates cash value, there’s the surrender fee to consider. Surrender fees are charged when the policy is surrendered within a certain period of time. The fees start out high at the beginning of the surrender period and are reduced each year until they reach zero. A policyholder replacing a policy while it is still within the surrender period has to pay the fee to transfer the cash value from one policy to another.

Be Aware of Churning

Churning is when an unethical life insurance agent persuades a policyholder to replace a policy for the sake of earning a new commission. Fortunately, there are established procedures that must be followed by life insurers and their contracted agents and brokers to help prevent churning.

This unethical practice does not happen that often, but it’s good to be aware of it. If a life insurance agent tries to convince you to replace your current policy when you don’t need to, get a second opinion.

Note: There is no rule that states you can’t own more than one life insurance policy. If your life has changed and you just want more coverage, consider the benefits of buying a new second policy versus completely replacing one. Read more about owning multiple life insurance policies here: Purchasing Multiple Life Insurance Policies. Otherwise, keep reading for more information about replacing a life insurance policy.

The insurance company you originally purchased from may not offer the best price now. Your life has changed and a different insurance company may be a better fit.

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How to Replace Your Life Insurance Policy

You are not required to buy the new policy from the same life insurance company you brought your current policy from. You are free to seek a new policy from a different insurance company or a different agent.

Buying a new life insurance policy through Quotacy is beneficial because we’ll shop your case to multiple top-rated insurance companies to make sure you get the best price possible. The insurance company you originally purchased from may not offer the best price now. Your life has changed and a different insurance company may be a better fit.

When you apply for your new life insurance policy, you’ll be asked on the application if you have any life insurance currently and whether or not you plan on replacing it. These questions assist in protecting you from fraud or scams, and making sure you’re not overinsured. Everyone has an insurability limit. Life insurers are happy to sell coverage to people, but they don’t want to create any financial incentives for people to die.

If you’re unsure whether or not you want to replace your life insurance policy, reach out to your agent and discuss the following questions. If you are no longer in touch with your agent, a Quotacy agent can help you.

Questions to ask if you currently have a term life insurance policy:

  • Are your current premiums affordable? Will they change?
  • Are your premiums higher for the new proposed policy?
  • Are there any added benefits with the new proposed policy?
  • Will you need a new medical exam?
  • What are the new waiting periods for the new proposed policy?
  • Is the new insurance company of the same quality and stability as your current insurer?

Questions to ask if you currently have a permanent life insurance policy:

  • Are your current premiums affordable? Will they change?
  • Are your premiums higher for the new proposed policy?
  • What are the acquisition costs for the new proposed policy?
  • Are there any added benefits with the new proposed policy?
  • Will you need a new medical exam?
  • What are the new waiting periods for the new proposed policy?
  • Is the new insurance company of the same quality and stability as your current insurer?
  • Will you pay surrender charges on your current policy?
  • What are the interest rate guarantees in the new proposed policy versus your current policy?
  • Are there tax consequences of buying the new policy?
  • Do I qualify for a 1035 exchange?

When you buy your new life insurance policy and you’re ready to officially cancel your old policy, you can just let it terminate on it’s own if it’s a term life insurance policy. By stopping premium payments, it’ll lapse after your grace period expires. If your old policy is a permanent life insurance policy, canceling it has more moving parts so be sure to work with your life insurance agent on the best methods of surrendering it.

Final Thoughts If You’re Thinking About a Life Insurance Policy Replacement

It’s important to compare your current policy with any new policy you might buy. Keep in mind your current policy may have benefits that allow you to accomplish your needs without needing to surrender it. It’s essential that you review it first.

Know that any changes in your health and your age may impact your ability to get a new life insurance policy or the premiums you’ll pay. Don’t cancel your current policy until your new one is 100% inforce.

To get an idea of what a new life insurance policy may cost you, run free term life insurance quotes instantly here at Quotacy. Our quoting tool allows you to see real quotes instantly and no need to give away any contact information. Window shop in peace knowing your phone and inbox won’t get inundated by sales people looking to try to sell to you.

Your Quotacy agent is your advocate in the life insurance buying process. They will be there to keep you updated during the process and answer any questions you have along the way.

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius

Marketing Content Manager

Natasha is a writer and content editor at Quotacy. She is also co-host of Quotacy’s YouTube series. She can't get enough of life insurance and outside of work is also working toward her Chartered Life Underwriter designation. Connect with her on LinkedIn.