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woman replacing a light bulb Replacing Life Insurance Policies

A Guide to Replacing Life Insurance Policies

March 22, 2023
Our goal is to educate and advise on life insurance options, so you can feel confident in making the right choice, whether that’s through Quotacy or somewhere else. To ensure we provide accurate and trustworthy information, our writers follow strict editorial standards.

You buy life insurance to protect your loved ones. But life can bring many changes. With these changes, your life insurance needs may change.

Replacing a life insurance policy with a new one may be necessary to ensure your family is adequately covered. In this guide, you’ll learn when replacing life insurance is beneficial and how it works.

How Replacing a Life Insurance Policy Works

Replacing a life insurance policy means purchasing a new policy and canceling your existing one. You can purchase a policy from any insurance company you choose and you’re not obligated to keep the same agent or insurer that you used for your first policy.

In fact, it’s possible that the insurer you originally purchased from no longer offers the best pricing for you. As time goes on, your circumstances change. You age, your health may change, you get a new job, or pick up a new hobby. All of these factors can affect life insurance pricing.

How long has it been since you first bought life insurance? Rates have changed. Learn more: Average Life Insurance Rates for 2023

It’s in your favor to work with a life insurance broker, like Quotacy, who can shop the market for you. Comparing rates across multiple insurers is the best way to ensure you’re getting a good deal.

When you apply for your new policy, the application will ask ask if you currently have life insurance and if you plan to replace it. You’re not required to replace your policy, and you can own more than one policy.

However, the insurance company needs to make sure that you won’t be over-insured. Everyone has an insurability limit, and life insurers are happy to sell coverage to people, but they don’t want to create any financial incentives for people to die.

Learn about your insurability limit: How Much Life Insurance Can I Get?

Things to Know About Replacing a Policy

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

Learn About Renewal and Conversion Options

If you’ve been diagnosed with a chronic or terminal illness, it’s possible that you are no longer insurable for a new life insurance policy. Simply replacing your policy may not be feasible. If you’re now uninsurable, renewing or converting your current policy may be the best option.

You May Need a New Medical Exam

If you’re looking to replace your current life insurance policy, you’ll likely need to undergo a new medical exam, just as you did when you first purchased your policy.

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 you replace 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 are high when you first buy the policy but decrease as years go on until the fee is nonexistent, typically after ten years. If you’re replacing a policy while it is still within the surrender period, there may be a 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.

See what you’d pay for life insurance

Comparison shop prices on custom coverage amounts from the nation’s top carriers with Quotacy.

Reasons for Replacing Life Insurance

In general, people replace their life insurance policies to change how much coverage they have, to reduce their premium, or to find a policy better suited to their needs.

Top 10 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.
  10. You no longer want to continue paying permanent life insurance premiums.

All of these are valid reasons for wanting to replace or switch life insurance policies.

Before officially replacing your current policy, ask yourself these questions.

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?

If you aren’t sure of the answers to these questions, talk to your agent and discuss them. If you are no longer in touch with your agent, a Quotacy agent can help you.

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

Things to keep in mind when thinking about policy replacement:

  • Compare your current policy with any new policy you might buy before making any decisions about replacement.
  • Review your current policy’s benefits carefully, as it may have features that allow you to achieve your goals without surrendering it.
  • Remember that any changes in your health or age may affect your ability to obtain a new policy or the premiums you’ll pay.

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 its 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.

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.

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.

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 may have along the way.


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