- Switching life insurance companies usually means replacing your policy, not transferring it.
- People often switch after life, budget or coverage needs change.
- Before switching, compare your current policy, new options and insurer strength.
- Don’t cancel old coverage until the new policy is active.
Changing Life Insurance Companies: What You Need to Know
A major life event, budget change or shift in coverage needs may prompt you to consider changing life insurance companies. Maybe your employer-based coverage doesn’t move with you when you change jobs. Maybe you bought a term policy years ago and now want longer-term protection. Or maybe you’re comparing costs and benefits more closely than you did when you first applied.
Key Takeaways
I When people say they want to transfer a life insurance policy, they often mean they want to replace it with a new policy from a different insurer. In most cases, you can’t simply transfer a life insurance policy to another company as-is. More often, switching life insurance companies means applying for a new policy and replacing your current one only after the new coverage is active. If you like your insurer but need different coverage, ask whether a conversion option is available before you replace the policy altogether.
Changing a life insurance policy requires careful review. The right move depends on your policy type, your health, your budget and whether your current coverage still matches what your family may need.
Quick takeaway: If you’re switching life insurance companies, don’t cancel your current coverage first. In most cases, replacing a policy safely means getting the new policy approved, in force and paid before ending the old one.
What changing a life insurance policy can mean
Changing a life insurance policy doesn’t always mean leaving your current insurer. Depending on your policy, you may be able to update coverage in one of a few ways:
| Option | What it usually means | When it may make sense |
|---|---|---|
| Keep your current policy | Keeping your existing coverage in place | If your policy still fits your goals and budget |
| Convert your policy | Changing coverage within the same insurer, often from term to permanent coverage | If you want a different policy type and your current company allows it |
| Replace your policy | Applying for new coverage and canceling the old policy later | If you need different features, a different coverage amount or a different insurer |
If you’re trying to transfer a life insurance policy to another company, replacement is usually the path, because it often involves new underwriting, a new premium and a careful review of what you may gain or lose.
Why people switch life insurance companies
As life changes, so can your insurance needs. The policy you bought in your 20s or 30s may not be right for you now. Common reasons people switch life insurance policies include:
Life events
If you get married, have a child or buy a house, your existing policy may not provide sufficient protection. You may need to increase your coverage limits so that, were you to pass away, your family could afford to pay off the mortgage or cover your child's college education.
Alternatively, you may need supplemental or additional coverage. If you have life insurance through your employer, you may get free or low-cost coverage up to a certain percentage of your salary. While that's a valuable benefit, it may not be adequate for your family's protection, and you may need additional coverage to care for your partner and dependents.
Coverage and benefits
Sometimes, you may need to adjust the coverage type. For example, if you purchased a basic term life policy, you may decide to switch to a whole life policy to take advantage of permanent protection. Or you may want policy features your current contract doesn’t include, such as a terminal illness rider or a different structure for lifetime coverage. Depending on your insurer, that may involve either a conversion or a full replacement.
Finances
Over time, your financial situation can change and prompt a switch of insurance policies to get a premium you can afford. For instance, whole life policies tend to be significantly more expensive than term life policies since they provide permanent coverage. If your finances continue to tighten, you may need to opt for a term life policy instead to reduce the premium you pay.
Streamlining coverage
Managing multiple policies from different companies can lead to missed payments or administrative errors. Consolidating your insurance policies under one insurer can make it easier to manage your accounts and, as an added benefit, you may qualify for multipolicy discounts.
What to review before switching life insurance companies
Before you replace coverage, compare what you have now with what you’re considering. A lower premium or a new feature may sound appealing, but it’s worth checking the details line by line.
Your current policy terms
Review the terms of your current policy. In some cases, canceling it will require you to pay a cancelation fee, typically known as a surrender fee or surrender charge. If you had a permanent life insurance policy that built cash value, the surrender fee is typically deducted from your cash value.
Term life insurance policies are usually simpler to cancel. Once you stop paying your premiums, your coverage ends. But you should review your policy contract to avoid any surprises. If you’re trying to transfer a life insurance policy to another company, this is also the time to see whether keeping the current policy may be more valuable than replacing it.
Your new coverage options
Work with an insurance agent or various insurers, or use a life insurance calculator, to determine how much coverage you need for your family members’ peace of mind.
Consider different coverage amounts, policy features and insurance types. If you want relatively inexpensive coverage to protect your loved ones for a set period, term life may be sufficient. But if you want lifetime protection and the ability to build cash value, whole life may be a better choice.
The insurer’s financial strength and reputation
When you purchase life insurance, you're putting a lot of trust into the life insurance company. You want to be sure the company is financially sound and able to afford current and future claims.
Checking a company's AM Best financial strength rating — a rating issued by an independent agency that specializes in assessing insurers' financial stability — is an excellent way to ensure a company is stable. Ideally, you want a company with an AM Best rating of at least A+ (Superior).
Still deciding between policy types? Exploring your life insurance options, term life alternatives and whole life choices can help you compare the broad differences before switching life insurance companies.
Step-by-step: How switching life insurance companies usually works
Step 1: Apply for the new coverage first
Before canceling an existing life insurance policy, apply for new coverage first. Depending on the type of coverage you want, your age and your health, you may have to go through the full underwriting process, meaning you'll have to undergo a medical exam and bloodwork. Even if these steps are not required, electing to complete them may result in a lower premium and other advantages.
Step 2: Compare the new offer against the old policy
Once you receive an offer, compare it against the policy you already have. Don’t focus only on premium. Review the death benefit, policy length, exclusions, riders, cash value potential and any waiting periods or policy limitations that may affect your decision.
Here's what to compare when evaluating a new policy against your current one:
| What to compare | Why it matters |
|---|---|
| Premium | A lower rate today may come with different long-term value or features |
| Coverage amount | Your replacement policy should still match your family’s needs |
| Policy type | Term and whole life serve different goals |
| Riders and benefits | You may lose features that are hard to replace later |
| Effective date | Timing matters if you want to avoid a lapse in coverage |
Step 3: Review the new policy thoroughly
You’ll be sent your policy, which will be based on the information you provided or the insurer gathered. Review its terms, coverage and premiums to make sure it fits your needs – including your budget.
Some key items to examine include:
- Policy effective date: Life insurance policies do not go into effect right away. With some companies, your policy may not start until the first of the following month.
- Contestability period: Most policies have a contestability period on the insurer's part. If you were to pass away during the first two years of being insured, the company can deny a claim if any of the information you submitted on your application was misrepresented.
- Exclusions: Review what isn’t covered by your policy. Some policies won't pay out the policy death benefit if you die due to participating in high-risk sports, for example.
- Coverage limit: One guideline often used to determine the death benefit for life insurance is that your policy should cover at least 10 times your income. But, depending on your circumstances and your health, that amount may not be adequate or affordable – or even possible. Talk to your insurance representative about your coverage needs and options.
Step 4: Cancel the old policy only after approval
Cancel your existing policy only after the new life insurance policy is approved, the first premium is paid and the policy is active. Otherwise, you risk having a coverage gap. This is one of the most important parts of switching life insurance companies safely.
Potential risks and how to avoid them
Switching life insurance companies can be a smart move, but there are trade-offs to consider before you replace coverage.
Difficulty getting coverage
When you're young and relatively healthy, getting coverage is easy; you can often get a policy without a medical exam. But as you age or develop health issues, getting life insurance can be more challenging. You'll have to undergo medical exams and, with some health issues, you may struggle to find a company willing to cover you at all.
Higher premiums
Policies tend to be less expensive for younger adults. As you age and your health changes, you'll likely have to pay a higher premium for coverage.
Higher premiums may be inevitable, but you can minimize the increase by talking to a representative and asking about potential discounts.
Tax consequences
Switching life insurance policies can have tax consequences if your policy has a cash value. The IRS may view the payout of the surrender value as taxable income. Before canceling an existing policy, talk to an accountant or financial advisor to assess how canceling the policy will affect your taxes.
Loss of benefits
Some older policies may have added benefits and insurance endorsements that aren't commonly available in products now. For example, an older policy may include a long-term care rider, which you'll lose when you switch policies.
You may need to buy a separate insurance product to get the same coverage if you change policies.
Here are the key risks to watch for when switching policies and how to reduce them:
| Risk | Why it matters | How to reduce it |
|---|---|---|
| Coverage gap | You could be left without protection if the old policy ends too soon | Keep your current policy until the new one is active |
| Higher premiums | Your age or health may lead to more expensive coverage | Compare the new offer against the value of your current policy |
| Lost benefits | Older contracts may include riders or terms that aren’t easy to replace | Review the old and new policies line by line before canceling |
| Tax consequences | Surrendering a cash value policy may affect your taxes | Talk to a tax professional or financial advisor |
When replacing a policy may be worth considering
Replacing a policy may make sense if your current coverage no longer fits your goals, your dependents or your budget. You may need a larger death benefit, a different policy type or a company that offers features your current insurer doesn’t provide.
Still, replacement isn’t always the best answer. If your health has changed since you first bought coverage, the policy you already have may be more valuable than it seems. And if your need has grown, adding coverage instead of replacing it may be worth reviewing.
Making the switch with confidence
Whether you experience a jump in income or have a new baby, there may be times when you need to change your life insurance policy. To switch insurance policies safely, review your current contract, compare replacement options carefully and go through underwriting before making any cancelation decisions. And err on the side of caution by keeping the old policy in effect until you’re sure the new one is active.
If you need help deciding what life insurance you need, how much coverage is necessary or the best way to change your coverage, contact an Amica representative.
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FAQs about changing life insurance companies
Usually, no. At least in the way you might transfer another financial account (in most cases). Switching life insurance companies usually means applying for a new policy and replacing the old one.
When people ask this question, they’re often describing a policy replacement. That usually means reviewing your current contract, comparing new options, applying for new coverage and ending the old policy only after the new one becomes active.
In most cases, no. The new insurer will usually require its own application and underwriting review.
Not always. Changing a life insurance policy can mean adjusting coverage with your current insurer, such as converting term coverage to permanent coverage. Switching life insurance companies usually means replacing your policy with one from another insurer.
Compare the premium, death benefit, policy type, effective date, riders, surrender charges, cash value, exclusions and the financial strength of the company. It also helps to review whether your current policy still gives you benefits that would be difficult or expensive to replace.
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