Can you get better rates when you switch? Maybe :-) Life Insurance is a medically underwritten product. As such your rates are based upon your age, sex, health at time of application and whether or not you smoke. All things being equal if you purchased a $100,000 life insurance policy on yourself 10 years ago and you apply with a different company today for the same amount of coverage your premiums will increase because you are 10 years older. That being said, we are living longer and COI (cost of insurance) has come down significantly over the last 5-10 years. Thanks to this decrease and new products that are more competitively priced (yes, different companies price their products to be attractive to specific markets) it is entirely possible to either get more coverage for the same premium you are paying today or get the same amount of coverage and see a decrease in your premiums. I would like to add that if you purchased your life insurance policy (term or permanent) more than 5 years ago, you owe it to yourself and your family to have it reviewed. There are new riders available that you don’t have with your current coverage like an ABR - Accelerated Benefit Rider - that advances a portion of your death benefit while you are living should you suffer a chronic, critical or terminal illness. This rider is free of charge on all of the life insurance policies we offer at JondaKnows (including term) and are simply invaluable. You no longer have to die to receive benefits from your life insurance policy!
Is it difficult to switch? Theoretically, no. For life insurance policies with cash value, the IRS allows for a 1035 exchange from your old policy into the new keeping the gains in your policy sheltered from taxes. So the IRS does’t care if you switch from one company to the next but the insurance carrier may feel differently. I have encountered carriers with FIERCE account retention policies. Account retention policies intentionally make it seem impossible to transfer your coverage. They reject paperwork for ridiculous reasons. A recent example involves transfer paperwork where I provided my company Fedex account number so that they could send the funds overnite because the paperwork had already been rejected twice. Their policy does not permit overnite of funds and now they require a whole set of new paperwork with original signatures making sure that the overnite instructions have been removed claiming that the paperwork must match the means by which the funds are delivered (ie. regular mail to regular mail). By the way, this was for $15,000 not a million! We got the transfer but this poor client was completely wore out with the experience which was completely unnecessary I might add.
Time/Money to switch? There are no transfer fees involved to switch carriers however, depending upon the length of time you have owned your current policy you may be subject to a surrender charge. These range from 10-15 years and vary by carrier. If you are subject to surrender charges they are disclosed in your annual report. The time involved to switch carriers averages 30-45 days but can take as much as 90. Whatever you do, do NOT cancel your current coverage until your new coverage has been placed in force. All too often, clients cancel their current coverage only to be denied for their new policy. The initial carrier is not obligated to reinstate your policy. If they do offer to reinstate they may require a medical exam which will reveal why the new carrier declined coverage and may nix your chances of reinstatement. Ways to facilitate the process include completing your medical exam as quickly as possible. Second, contact your primary care physician to let them know you have applied for life insurance. Explain that the company will be requesting your medical records and that you would appreciate a timely response to the request. This is where we see the biggest delays in processing applications. Some doctor offices have one person who comes in twice per month to copy medical records on a first come first served basis. It can be a nightmare getting records. I will give a shoutout to the state of CA. They have a mandatory 3 business day turnaround :-)
In summary, if you have owned your policy for more than 5 years request a policy review. It’s also worth mentioning that if you like your policy/carrier but are not happy with your life insurance agent you can get a new agent without having to change companies. Simply call the carrier’s number found on your annual statement and ask that your policy be reassigned.
If you would like additional information on life insurance or would appreciate a policy review, call JondaKnows at 304.840.0001.
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