The Life Insurance Superstore

Critical Questions to Help Clarify Considerations of Policy Replacement

1. What was the purpose for which you originally purchased the subject policy?

2. Does that purpose still exist?

3. Is the amount of the policy still appropriate? If there’s still a need, but not as much, perhaps reducing the size of the policy will solve the problem prompting the replacement. On the other hand, if the need has increased since your last assessment and such increases are likely in the future, a recommendation to switch to No-Lapse UL’s level death benefit is not likely to accomplish your objectives.

4. There’s undoubtedly an increased life insurance premium requirement to maintain a current assumption policy if it was originally purchased based on best illustrated price. Can you afford this increased premium? Can the increased premium come from capital, freeing up the burden on your current income?

Practical Considerations - Do You Qualify for a New Policy?

Replacing a life insurance policy can involve a number of disparate facts and issues. Is the insured still insurable in an underwriting category at least as favorable as the original policy? Have there been any new avocations or activities that might result in a more costly rate class? Has a parent or sibling died since the first life insurance policy was underwritten? Has your income temporarily declined, potentially keeping you from purchasing as much insurance in the replacement policy as you already own? Do you understand that a current policy more than 2 years old is incontestable as to incorrect statements or death by suicide, and that a new policy will incur another 2-year period before it becomes incontestable?

The Replacement Questionnaire

The Society of Financial Service Professionals in Bryn Mawr, PA has produced an objective explanation and questionnaire for the purpose of assessing proposed policy replacements. A copy of the questionnaire will he found in the Appendix. When a policy replacement is recommended by an insurance agent, advisors and policy owners should consider asking the agent to fill out the form for additional disclosure and discussion procedures.