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Sample - Explanation of advantages & disadvantages for replacing life insurance

Client name: _______

Proposed new insurer: Existing insurer: ________

Why does the existing policy not meet the client’s needs?

Premium: Face amount: Plan: Riders:

Explanation of advantages & disadvantages: ______________________________________________________________________

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How would the new policy meet those needs?

Premium: Face amount: Plan: Riders:

Explanation of advantages & disadvantages: ______________________________________________________________________

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There are risks associated with replacing the existing insurance policy, such as:

1. Most polices will not pay if the person insured commits suicide within two years of the policy’s issue date.

2. If a claim for policy benefits is submitted within the first 2 years of a newly issued policy, the insurer is allowed by law to contest the validity of the evidence of insurability submitted at time of application.

3. After the new policy has been in force 2 years the insurer must prove that the evidence of insurability was fraudulent to deny a claim, except in the case of misstatement of smoking habits by the life insured which is always considered a fraudulent statement.

4. Life insurance policies that have been in force for 2 years may be eligible for a “compassionate assistance” loan if the insured becomes terminally ill. This option is not available on an insurance contract in force less than 2 years.

5. If your present policy is a term life insurance policy, you may have guaranteed conversion options that are not available to newly issued contracts.

6. Depending on the date of issue and the policy wording of your present policy, you may have preferred tax advantage concerning available cash and /or loan values and /or that offer preferred investment guarantees.

7. If your current policy includes benefits for critical illness conditions, be aware that a newly issued policy will have an exclusion period for claims for cancer and possibly other insured conditions. This exclusion period normally continues for 90 days after the new policy has been placed in force, but the exclusion period could be longer.

8. Newly issued policies are subject to continued insurability at time of delivery. This means changes in your insurability between the time of application and the delivery date of your policy may not be acceptable to your new insurer and must be disclosed to the insurer in writing. Once disclosed, they may not be acceptable to the insurer and your insurance offer could be rescinded.

Riders, options and benefits attached to your existing policy are usually terminated when new coverage is arranged, even in situations where the new coverage is placed with the incumbent insurer.

“I have read this advisory document and understand the considerations presented here”.

____________________________ ______________________ _________________________________

Insured’s signature Date Owner (if not the insured)

“I have reviewed with the client the LIRD and this explanation of the advantages and disadvantages of replacing their life insurance policy, before starting the application for the new policy”.

__________________________ ____________________

Broker’s signature Date

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