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  • Why discontinue insurance policy to purchase another?
  • August 5, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA

    To put it simply, life insurance replacements means discontinuing one life insurance policy to purchase another one. Reasons for insurance replacement vary from person-to-person; there is no one-sizes-fits-all reasoning behind replacement.

    Since life insurance is a complex financial asset, it is advised to monitor your policy on a regular basis.

    When thinking of replacing your life insurance policy, consider the following issues.

    Has the insured’s insurability and/or health improved since the policy was first issued? If the existing policy was first issued in a substandard rating class (i.e., with an extra premium charge), will the company remove or replace the rating?

    If the insured person was formerly a smoker but is now a non-smoker, will the current company change the premium to a non-smoker rate?

    Improved health conditions is a time to consider replacing your existing life insurance policy.

    If the current company will not assist the policy owner in these two circumstances, insurance replacement might be in their favor.

    What is the current company’s financial condition compared to the proposed company? Has either company’s financial conditional significantly deteriorated?

    A justified replacement may be needed in order to rectify an unjustified replacement.

    Policy ownership may also trigger replacement. For example, if an ex-spouse or business partner claims partial or full ownership, a replacement might be indicated.

    The current policy may no longer suit your current life insurance needs. The policy may be an old non-participating policy (i.e., it does not pay dividends), which has not been updated by the company to give you the benefit of potentially more favorable current interest and mortality experience.

    Before making any decisions regarding insurance replacement, contact your life adviser and insurance company. Discuss your current issues and concern with them. As companies continually enhance their policies, they recognize that their policies may become obsolete and will consider upgrades or exchange programs.

    If you seek further assistance or additional information, please feel free to email me at

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

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Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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