Switching Life Insurance: Is It Possible To Change Providers?

Life insurance policies are usually in effect for decades, but there are many reasons why you might want to switch providers. For example, your term life policy might expire, or you might want lower premiums or better services. However, switching providers is not as simple as it seems and there are several things to consider before making the change. Firstly, you will need to review your coverage needs and calculate how much life insurance cover you need. You will then need to shop around and compare life insurance policies to find the best cover for you. It is also important to be aware that switching providers may result in new taxes and higher premiums.

Pros and cons of switching life insurance providers

Switching life insurance providers is possible, but it is not as straightforward as with other types of insurance. There are several factors to consider when deciding whether to switch providers, as there can be benefits and drawbacks.

Pros of switching life insurance providers:

• You may be able to find a policy with lower premiums or better services.
• Your needs may have changed since you first bought coverage, and a new provider may be able to offer a policy that better aligns with your current circumstances. For example, if your income has changed or your family has grown, you may want to adjust your level of coverage.
• If you have a term life plan with your current provider, switching to a whole life policy with a new provider may be a more suitable option for you.

Cons of switching life insurance providers:

• You may have to undergo a new medical exam, which could lead to a higher premium if your health status has changed. In some cases, a new company might even deem you uninsurable.
• A new contestability period will apply, which means that if the policyholder passes away within the first two years of purchasing the new policy, the insurance company has the right to investigate the claim before paying the beneficiary.
• You will likely have to pay upfront fees again, which can be financially burdensome.
• There is a potential for tax burdens, such as if you transfer ownership of your policy and name a third individual as the beneficiary, resulting in a gift tax.
• Switching providers can be a complicated and time-consuming process, especially if you have a whole life policy and need to move any accrued cash value.

It is important to carefully consider your options and weigh the pros and cons before deciding whether to switch life insurance providers.

How to switch life insurance providers

Yes, you can switch life insurance providers, but it's not as simple as swapping providers for other types of insurance, such as car insurance. There are a few things to consider before making the switch. Here's a step-by-step guide on how to switch life insurance providers:

• Figure out your coverage needs: Think about what kind of policy you want. Your needs may have changed since you purchased your previous coverage. Consider any changes in your income, family size, or financial situation. Review your current policy to see if it's still adequate for your needs. Calculate how much life insurance coverage you need and determine if you want to change the scope of coverage.
• Shop around and compare policies: Research and compare policies from different insurers to find the best one for your needs. Look at multiple insurers and their offerings. Consider factors such as price, coverage amount, policy terms, and customer service reputation.
• Buy your new life insurance policy: After deciding on a new policy, purchase it before cancelling your existing coverage. Talk to the new insurance company's agent to ensure you understand the new policy's terms, conditions, and any applicable fees or waiting periods.
• Cancel your existing life insurance: Contact your current insurance provider to cancel your existing policy. If you have a term life plan, this step should be straightforward. However, if you're moving from one whole life policy to another, it's more complicated. Ensure you transfer any accrued cash value before cancelling.
• Start the new policy: Ensure your new policy starts on the same day your old policy ends to avoid a gap in coverage. Check the price of premiums and be aware of any waiting periods before you can claim on the new policy.

Remember, switching life insurance providers may come with certain consequences, such as a new medical exam, a new contestability period, paying upfront fees again, potential tax burdens, and the possibility of policy conversion. Take the time to carefully consider your options and consult with insurance professionals before making any decisions.

Medical exams and switching

Medical exams are a standard part of the life insurance application process. If you switch life insurance providers, you will need to take a new medical exam, and you won't be able to carry over the results from your existing policy. This means that any new health issues could be taken into account, potentially leading to a more expensive policy. It's also possible that a new company might deem you uninsurable.

The medical exam for life insurance typically includes a medical questionnaire and a physical examination. The questionnaire is designed to give the life insurance company an idea of how healthy you are. You will usually be asked a series of health-related questions, including any medications you take, how often you take them, and their dosages. Other questions may cover your family medical history, what doctors you've seen recently, their recommendations, and whether you've been hospitalized recently.

The physical examination will typically include checking your height, weight, pulse, blood pressure, and also taking blood and urine samples. Other examination requirements could include an electrocardiogram (EKG), stress test and/or a chest X-ray, depending on the insurance company’s underwriting guidelines. Carriers may request them based on your age and desired coverage amount.

The results of the medical exam will help the insurer determine your health and mortality risk, and consequently, your premiums. The healthier your lifestyle, the cheaper your rate is likely to be.

If you are concerned about how your health will affect your rate or ability to get coverage, or if you simply don’t want to bother with an exam, you can get life insurance without a physical medical exam. Some carriers offer term and permanent life insurance with no medical exam, relying instead on a detailed application and health questionnaire. While it may be faster and easier to get life insurance with no medical exam, it may be more expensive and the death benefits are generally lower.

Contestability periods

The contestability period helps protect the life insurance company from fraud. If the insured person dies within the first two years of the policy, the insurance company has the right to investigate the claim before paying the beneficiary. This is because it is statistically unlikely for a person to die within the first two years of taking out a life insurance policy. The insurance company can review the application for any health or lifestyle-related information that may have been withheld or misrepresented. For example, if the insured person died in a car accident but had failed to disclose a history of alcohol abuse, the insurance company can deny the death claim.

The consequences of lying on a life insurance application can be severe. The insurance company can cancel the policy, deny future coverage, or even initiate legal action. If convicted of insurance fraud, the applicant could face fines or jail time. It is important to be honest and forthcoming on the application to guarantee that your loved ones receive the full death benefit.

The contestability period exists to penalize people who intentionally provide incorrect information to obtain lower premiums. It is not meant to provide loopholes for insurers to avoid paying out claims. If you provide accurate and complete information on your application, you likely have nothing to worry about during the contestability period.

Policy conversion

Understanding Policy Conversion

Steps to Convert Your Policy

• Assess Your Coverage Needs: Start by evaluating your current coverage and identifying any changes in your personal circumstances, such as an increase in income, family growth, or changes in your mortgage or debt obligations. These factors will help determine the type and level of coverage you now require.
• Explore Alternative Providers: Research and compare different insurance providers to find one that aligns with your updated needs. Look for providers that offer the specific type of coverage you're seeking, whether it's term life, whole life, or another variation.
• Contact Your Current Insurer: Before making a switch, it's worth engaging with your current insurance company. Discuss your concerns and see if they can offer alternative solutions, such as converting, replacing, or supplementing your existing policy to achieve the coverage you desire.
• Understand the Implications: Be aware that converting to a new policy may trigger a new medical exam, which could lead to a higher premium if your health status has changed. Additionally, a new policy will reset the contestability period, during which the insurance company has the right to investigate claims before paying the beneficiary.
• Consider Top-up Policies: In some cases, instead of converting to a new provider, you may benefit from taking out an additional 'top-up' policy from another insurer to fill any gaps in coverage. This option may be more cost-effective and avoid the potential drawbacks of policy conversion.

Final Thoughts

Frequently asked questions