What you should know before switching life insurance policies

Switching life insurance policies

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What you should know before switching coverage from one insurer to another.

You always want to make sure you’re getting the most affordable life insurance at a competitive price, right? You’re not alone. But before you get coverage from a new company, you should make sure you’re making the switch from your life insurer to another for the right reason.

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How to switch life insurance policies

Switching out your life insurance policy from term-life to whole life or vice-versa is actually a lot more straight-forward than most people would assume.

Here are the steps to take to switch your policy

  1. Figure out how much coverage you now need
    Life circumstances change and so might the amount of coverage you need. You might’ve had another child, changed lifestyles or accrued more expenses recently. Your circumstances are unique to you, and you should take into account all factors on how much coverage you now need. Knowing the amount of coverage you need will help ensure your loved ones stay protected.
  2. Purchase your new policy
    Before canceling your existing policy, make sure you’ve purchased a new plan. Most new policies require a medical exam and there’s a chance you might no longer qualify or get the amount of coverage you need. You don’t want a gap inbetween coverage just in case life happens.
  3. Cancel your existing policy
    Once your new policy is in place, cancel your existing policy. Don’t just stop paying and hope that they will cancel your plan for you. If your existing policy is a whole life policy, you might’ve accrued value in your account. If so, you should contact your whole life insurance agent and request to cash out your policy – otherwise, you will lose any money you had invested.

Why do people change their life insurance policies?

Reasons why people switch life insurance policies are:

  • Reaching the end of term. Generally when you take out life insurance, you’ll be asked to select the length of time you want coverage for. When you reach the end of a term, your level premium will likely raise for the new term. At this point, you’ll have the option to reassess your situation and need for life insurance — either with the same company, a new company or not at all.
  • Change in circumstances. Due to the long-term nature of most life insurance policies, there’s a good chance of your circumstances changing over the term of your policy. Some people end up switching life insurance policies when they realize their existing coverage no longer meets their needs.
  • Financial reasons. One of the reasons why people decide to switch life insurance policies is because of the cost of premiums. Premiums can become too expensive for two reasons:
    • Due to age and the increased risk factor that comes with getting older.
    • The amount insured can grow to be excessive due to changes in the family dynamic (children no longer financially dependent).

What should I consider before I switching?

While switching life insurance plans isn’t a big hassle, there are some important things that you need to take into consideration including:

  • Higher premiums. You may find that your premiums are higher than expected with a new life insurance policy. This may be because you may present more of a risk as you’ve gotten older or because commission for the life insurance agent is worked into the price.
  • Long waiting period. Often, there is a fairly long waiting period — about a year or two — before you can make a claim on your new policy which could be a concern for some people. You should check carefully before you make the switch if this is going to be a problem for you.
  • Reputation. When switching to a new provider, you should make sure that you do your research so you can find out more about the company and how well known, plus experienced the company is when it comes to life insurance.

What information will I need to switch to a new insurer?

When making the switch, it’s crucial to be positive that your new insurer is licensed. Once you’ve checked that they’re legit and that the policy meets your needs, switching a policy easy. You’ll need to provide:

  • Current life insurance number
  • Insurance carrier
  • Expiration of current policy

If the insurer you’re switching to is not transparent, acts shady or seems unprofessional, you’re better off staying away to save yourself a headache.


Can I have two life insurance policies at once?

Yes. There are many reasons why you might want multiple life insurance policies. However, even though you can have more than one life insurance policy, it can be an expensive way of getting the coverage you need. If you can find a way of having one life insurance policy to look after all your needs, you should be able to find the same amount of coverage for a cheaper price.

What do I need to consider when obtaining multiple life insurance plans?
Taking out multiple life insurance policies can provide increased peace of mind and protection for you and your loved ones. However, there are some things that you need to bear in mind when it comes to more than one life insurance plan:

  • Managing. Although having multiple life insurance plans in place can offer greater security, it can also cause more confusion and become difficult to manage. The more life insurance plans you have, the more time you’ll have to put into managing and reviewing them.
  • Cost. Multiple life insurance plans come with multiple premiums to pay, which can be costly in the long-term.
  • Time. You’ll have to dedicate more time not only to find suitable plans and providers but also reviewing and checking that your life insurance plans and coverage are up-to-date and fit your needs.

Tips for switching to a new policy

If you’ve done the research and have decided that your old policy won’t cut it anymore, there are some strategies you can use to make the process as smooth as possible. Here are some tips to save you time and money:

  • Don’t cancel your old policy until your new policy is in effect.
  • Calculate the cost of your new policy to make sure that when all is said and done with making the switch — commission, fees and any other upfront costs — that your new coverage will be less expensive and offer competitive coverage.
  • Ask the insurance provider if there will be any tax consequences or surrender fees when dropping your old policy. If there is, check that the cost won’t make switching to a new policy more expensive.

Bottom line

You obviously want to find the most competitive life insurance deal on the market. However, there’s no such thing as the best deal, so you’re required to do a little bit of legwork by reviewing your policy and seeing what your other options are.

Before you make the switch to a new provider, you should see if your current insurer can offer you better rates. If they can’t, feel free to shop around and make a switch to save yourself some money — just be positive that you’re getting sufficient coverage for you and your loved ones.

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Richard Laycock

Richard is the Insurance Editor at finder, and has been wrangling insurance Product Disclosure Statements for the last 4 years. When he’s not helping Aussies make sense of the fine print, he can be found testing the quality of Aperol Spritzes in his new found home of New York. Richard studied Journalism at Macquarie University and The Missouri School of Journalism, and has a Tier 1 certification in General Advice for Life Insurance. He has also been published in CSO Australia and Dynamic Business.

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