Can I Transfer My Life Insurance Policy if My Circumstances Have Changed Due to a Life Event?

Consider Transferring Your Life Insurance Policy

Key Facts

  • Policies will generally need to be cancelled if the policy owner is interested in taking out another policy.
  • It can be possible to transfer insurance held in one superannuation fund to another life insurance policy. This is known as a life insurance rollover.

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For many people, life insurance cover is something that not only provides their loved ones with valuable financial protection in the event of the policyholder's death but also provides important peace of mind for both the policyholder and the family. Nobody wants to leave their loved ones in the lurch if they are no longer around to help support them and having life insurance in place means that this is a concern that you can deal with whilst you are still around.

Why it is important to review your policy regularly

Life insurance policies are plans that can last for many years or even for a lifetime, which means that although the plan you take out may be well suited to your needs when you first take it out, its suitability may dwindle over time due to changes in your circumstances. There may also be financial issues at hand that can make a difference to the suitability of your life insurance cover, such as premiums going up or your income falling and affecting your ability to keep up with premiums.

The good news is that if you do find that your life insurance policy is no longer suited to your needs for whatever reason, it is relatively easy to transfer your life insurance policy and take out something that is more suited to your needs. In most cases, you simply need to contact your insurance provider to inform them that you wish to cancel or transfer tour life insurance plan. It is always advisable to also put this in writing after you have informed them by phone.

Another thing that you need to bear in mind is the risk of leaving a gap between cancelling your old life insurance cover and having your new life insurance cover come into play. In order to ensure that you are not left with a period where you are not covered at all, you should look at making your new cover effective before you cancel your old one.

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Things to Consider When You are Changing Your Life Insurance Policy

If you are considering changing your life insurance plan you shouldn't find it to too much hassle, as these days the process is pretty quick and simple. However, there are a few things that you should bear in mind when it comes to switching your life insurance. This includes:

  • The amount you pay in your first year: When you take out your new life insurance plan after switching you could find that you pay more for the first year than you expected to. This is because the sales and commission charges may have been worked into the price, hence the higher payments.
  • The waiting period before you can claim: You may find that when you switch to a new life insurance policy, there is a relatively long waiting period in place before a claim can be made. If you were to die within this period, your loved ones could end up getting nothing. Therefore, you should make sure you check if there is a waiting period on place.

Why You May Want to Consider Transferring Your Life Insurance Cover

Many people decide to transfer their life insurance policies and there are a number of different reasons why they do this. You may find yourself in a position where you want or need to switch your life insurance policy for a number of different reasons. Some of the reasons why people might decide to switch their life insurance plan include:

  • Your circumstances have changed since you took out the plan: Although the life insurance plan you have may have seemed like the perfect choice for your needs and circumstances when you took it out, your circumstances may have changed radically since that time, which means that you could find that you need a different life insurance plan to ensure continued suitability. It is always advisable to regularly review your life insurance and other insurance plans, as you can then determine if and when you need to change.
  • Your finances have changed: You may find that since you took out your life insurance plan your financial situation has changed, and whilst the premiums were affordable previously they may now be more difficult to keep up with. So, lack of affordability may factor into your decision to switch life insurance.
  • Value for money: When you first took out your life insurance plan you may have thought that you were getting value for money on the policy. However, changes such as increased premiums may change your view with regards to whether the life insurance plan still offers value for money and this may be your reason for switching.
  • Time to renew: If you have term life insurance cover, which is valid for a specified period of time, and your expiry date has come around, you may decide to switch provider when you take out your new policy.

Transferring Life Insurance to New Spouse

Transferring ownership and control of your life insurance plan to your spouse is a very important decision and it is best to seek advice before you go ahead and make any changes. This will enable you to determine whether a transfer is in your best interests depending on your reasons behind transferring the cover.

Steps to Take Before You Transfer Your Life Insurance to Your Spouse

Transferring your life insurance to a spouse can be done but it is not something that you should take lightly and it is something that you should put a lot of thought into. There are a number of steps that you should take before you take any action with regards to transferring your life insurance. These include:

  • Seek professional advice: Unless you are an expert in this field yourself, you should seek professional advice with regards to transferring your life insurance and what implication this will have. The professional or person you take expert advice from may depend on your reasons for transferring the life insurance cover. For example, if you are transferring your life insurance your life insurance for tax purposes, you may need to consult with a tax professional to see if and how this will benefit you.
  • Speak to your insurance provider: If you are looking to transfer your life insurance you will also need to speak to your life insurance provider to inform them about your plans and to order the necessary paperwork to get the transaction completed. An assignment or transfer document will usually need to be completed, although there is no charge for this, and the wording of the policy will have to be changed.
  • Discuss payment of premiums: If and when you transfer your life insurance cover to your spouse, you will need to remember that it is your spouse that will take over the payment of premiums and will be responsible for ensuring that these are made. You will need to ensure that you discuss the important of keeping on top of the premiums with your partner to ensure that the cover keeps running and does not become invalid due to failure to meet payments on premiums.

Other Considerations Before You Transfer Your Life Insurance Policy

Although transferring your life insurance policy to your spouse may seem like the most sensible idea depending on your reasons for doing so, it is also important to bear in mind the legal implications of doing this. Once you have made the transfer the action will usually be irreversible, which means that you will pass control of the policy over to your spouse once and for all. Even if this is not of concern to you, it is also important to consider the future. For example, if you and your spouse decide to get divorced in the future and you have already transferred the insurance policy into your partner's name, your partner will continue to have ownership and control of the policy. This means that he or she will be able to do things such as transfer ownership again or even change the beneficiaries on the policy, and you will have no right to stop this from happening because your partner has legally been given control.

You should therefore ensure that you are totally confident that transferring your insurance policy to your spouse is what you want to do before you take the plunge and transfer it over into his or her name.

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Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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