Analyze situation before replacing life insurance plan

Feb 07, 2012

Before making a deal for a new insurance plan, policyholders should examine what changing policies would mean.

When looking to replace a life insurance plan, Tom Sobolewski of the Financial Planning Association writes on Nasdaq's website that careful analysis is needed.

"When an insurance agent recommends a replacement, it may be a good idea for you and your family - or it may just be a good idea for the agent," Sobolewski said. "Careful analysis is required, and you should seek the help of a financial planner."

As far as advantages to replacing an insurance policy, he said people may be able to get a higher death benefit, a lower cash premium or just a policy change that is better suited toward that person or family's situation. For disadvantages, he said cost is the main issue, as policies can be expensive to issue and reduce the cash value of a contract. Important features could also easily forgot about and therefore lost, so before going into replacing a policy, people should look at it very carefully.

Ginger Applegarth writes on MSN Money's website that while converting to a different policy sounds simple enough, there are costs that could come out of the life insurance policyholder's pocket if people are not careful.

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