Policy replacement

[Melo5457]

I will be replacing 2 new customers current policies to Whole Life, the premiums will be a little bit more than what that are paying for their policy now, (these 2 different customers have the same Carrier, that I will replace), The reason I will show on the replacement form is "Customer's current Premiums will continue to increase and customer wants to be locked in on premiums...What are your thoughts about this--I have read information on this forum about replacements and trouble you can get into when doing replacements.
Thanks
Melo

 

[DHK]

Will the death benefit be the same? If the death benefit will be lowered, that needs to be acknowledged in some way that the lowered DB is still in alignment with their needs and goals.

Don't just talk about premiums, but about total coverage and cash value accumulation (or lack thereof).

 

[goillini52]

Will the death benefit be the same? If the death benefit will be lowered, that needs to be acknowledged in some way that the lowered DB is still in alignment with their needs and goals.

Don't just talk about premiums, but about total coverage and cash value accumulation (or lack thereof).

Sounds like he's replacing term with whole life. Some of those 5 year renewable term policies, like Globe Life's get to the point where they can no longer afford the premium and they probably didn't realize what they were buying when they took it out through the mail. I'm just guessing that this might be what's going on with the OP?

 

[Newby]

I will be replacing 2 new customers current policies to Whole Life, the premiums will be a little bit more than what that are paying for their policy now, (these 2 different customers have the same Carrier, that I will replace), The reason I will show on the replacement form is "Customer's current Premiums will continue to increase and customer wants to be locked in on premiums...What are your thoughts about this--I have read information on this forum about replacements and trouble you can get into when doing replacements.
Thanks
Melo

There is absolutely nothing wrong with replacing policies IF the customer benefits and wants them replaced. Sounds to me like they have non-guaranteed UL policies and want whole-life. I replace those all day every day IF the ULs are beyond salvaging AND the applicant can cleanly pass underwriting.

The mistake you are making is using the same company. You might find that you did charity work because many companies will not pay a commission on internal replacements. Still benefits the customer. But won't benefit you in any way.

 

[DHK]

The mistake you are making is using the same company. You might find that you did charity work because many companies will not pay a commission on internal replacements. Still benefits the customer. But won't benefit you in any way.

I think he meant that he has two clients... who happen to have their term policies with the same company... but he's replacing them with a new company, not within the same company.

 

[Newby]

I think he meant that he has two clients... who happen to have their term policies with the same company... but he's replacing them with a new company, not within the same company.

Oh. I missed that.

 

[martha ramirez]

The above replies are correct. There's no reason you can't replace these policies if it benefits the client. In this case it sounds like you're replacing a term or a UL that's going south with a WL policy, which is fine. You'll just want to note exactly what you're doing on your replacement form and for what reason. Something like, "Proposed insured currently has a policy that will expire, or become too expensive to maintain, and would like to change this policy to one with a level premium. They realize that they will pay slightly more in premium, and a little less in death benefit, and have acknowledged that this is acceptable for a level premium."

 

[rousemark]

The above replies are correct. There's no reason you can't replace these policies if it benefits the client. In this case it sounds like you're replacing a term or a UL that's going south with a WL policy, which is fine. You'll just want to note exactly what you're doing on your replacement form and for what reason. Something like, "Proposed insured currently has a policy that will expire, or become too expensive to maintain, and would like to change this policy to one with a level premium. They realize that they will pay slightly more in premium, and a little less in death benefit, and have acknowledged that this is acceptable for a level premium."

Depends on the state.. In Tennessee you do not have to give an explanation of the replacement.

 

[David Block]

It does not appear that Alabama requires a reason on the replacement form. However, if the carrier you are selling has a spot for a reason the current plan is being replaced, that is a separate issue. Assuming you are keeping the face amount the same (which implies the need has not changed over the years), there should be no issue. If, however, you are reducing the coverage to keep the cost at or near their current outlay, the conversion carrier may have a compliance issue with that. Please note that if the coverage elected is sufficient, regardless of a reduction, this should be a moot point. Out of curiosity, what carrier's whole life are you recommending?

 

[Ernesto]

It does not appear that Alabama requires a reason on the replacement form. However, if the carrier you are selling has a spot for a reason the current plan is being replaced, that is a separate issue. Assuming you are keeping the face amount the same (which implies the need has not changed over the years), there should be no issue. If, however, you are reducing the coverage to keep the cost at or near their current outlay, the conversion carrier may have a compliance issue with that. Please note that if the coverage elected is sufficient, regardless of a reduction, this should be a moot point. Out of curiosity, what carrier's whole life are you recommending?

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