Life insurance is different from general insurance in that it involves a relatively long term and making changes to an existing life insurance policy may not be in the best interests of the customer. If the policyholder surrenders the policy midway, especially in the first few years after the policy is in force, there is usually a loss. To protect their interests, the policyholder should carefully compare the terms of the existing policy and the new policy before deciding to switch the policy to assess whether the life insurance switching (” switching”) is in his own best interests.
What is reinsurance
Reinsurance is when you use or intend to use some or all of the funds of your existing life insurance policy, or use or intend to use the savings from reducing the premiums payable on your existing life insurance policy, to finance your purchase of a new life insurance policy. For example, such funds or amounts may come from:
a) Arranging for surrender/partial surrender of an existing life insurance policy to obtain its surrender value
b) Drawing on a policy loan (including automatic premiums) from an existing life insurance policy Loan or mortgage transfer)
c) Extraction of policy value from an existing life insurance policy (eg cashing out dividends or redemption of fund units, etc.)
d) Allowing existing life insurance policy to lapse (eg cessation of premium payments)
e) Exercising existing Entitlement to “Premium Holiday” in a life insurance policy
How to protect your rights
If you indicated at the time of your new application that you would or have not yet determined whether you would use some or all of the funds of your existing life insurance policy, or use or intend to use the savings from reducing the premiums payable on your existing life insurance policy, to finance the purchase of a new life insurance policy For life insurance policies, your licensed insurance intermediary must explain to you the implications of the change in financial, insured and claim eligibility, and explain and assist you in completing the Important Information Statement – Transfer (“Declaration”). Book””). Therefore, licensed insurance intermediaries may ask you for certain information about existing life insurance policies. You may need to contact the insurer of your existing life insurance policy and obtain accurate and up-to-date information about your existing life insurance policy.
You should read the contents of the Declaration carefully and ensure that the licensed insurance intermediary has explained to you all the information on the Declaration and you understand the relevant contents before signing it. If you do not fully understand everything, or if the advice or information provided to you by your licensed insurance intermediary is different from the information contained in the Declaration, please do not sign the Declaration and should not replace the existing life insurance policy.
Important things to know about reinsurance
You should carefully compare the terms of your existing life insurance policy with your new life insurance policy and understand the following implications of switching to assess whether switching is in your best interest:
financial impact
- Informed decision: A life insurance policy usually has a longer-term. If you surrender/withdraw the policy mortgage loan / withdraw the policy value / suspend or stop paying premiums / reduce the premiums payable, you will generally incur losses (especially in the early years of the policy), including due to losses due to charges. You should carefully compare your existing life insurance policy with your proposed new life insurance policy and assess whether it is in your best interest to replace your existing life insurance policy before making a final decision.
- The difference between the cash value of surrender/lapse of an existing life insurance policy and the total premiums paid: The cash value of surrendering or allowing to lapse on an existing life insurance policy may be less than the total premiums you have paid, ie you may incur losses. In addition, you may be liable for surrender charges arising from surrendering or allowing the policy to lapse.
- Interest on Policy Loans: The insurance company that issued your existing life insurance policy may charge interest from the day you draw down the policy loan. You should review the periodic statements carefully to understand the opening and closing loan balances for the relevant period, as well as the amount of interest charged for that period. Your existing life insurance policy may be terminated if the accumulated loan amount (and interest) exceeds a specified level of account value/cash value of the existing life insurance policy.
- Withdrawal of Policy Payment/Partial Surrender Fee: If you withdraw the policy value or partially surrender your existing life insurance policy within the prescribed period before the policy term of the existing life insurance policy, you may be required to pay the relevant fees. For a new life insurance policy, you intend to purchase, you may be required to pay other early surrender/withdrawal charges within the prescribed period before the expiry date of the new life insurance policy.
- Policy Issuance Fees and Licensed Insurance Intermediaries’ Compensation: If you purchase a new life insurance policy, most of the initial premiums paid may be used to pay the insurance company’s policy administration fees and licensed insurance intermediaries’ compensation. Therefore, you may incur additional expenses to replace your existing life insurance policy.
- Higher premiums: As you age and your health, occupation, lifestyle/habits, and recreational activities have changed (compared to when you purchased your existing life insurance policy), you may need to pay for a new Life insurance policy pay higher premiums.
- LOSS OF FINANCIAL BENEFITS UNDER EXISTING LIFE INSURANCE POLICIES: You may lose financial benefits that have accumulated over the years under your existing life insurance policy (for example long-term customer rewards or bonuses) or loss of financial benefits you are entitled to from your existing life insurance policy ( For example terminal bonus or policy bonus).
- Financial benefits of new life insurance policies are not guaranteed: The benefits stated in the description of new life insurance policies may not be guaranteed benefits and will be affected by the performance of the insurance company issuing the new life insurance policies. If the new life insurance policy is an investment-linked life insurance plan policy, it states that the calculation of the stated benefits is based on an assumed rate of return only.
Impact on Coverage Eligibility
Changes in coverage: If you purchase a new life insurance policy and replace it with an existing life insurance policy, part of the coverage of your existing life insurance policy may vary depending on your age, health, occupation, lifestyle/habit, and Participation in recreational activities has changed and is not covered under the new life insurance policy. Also, the new life insurance policy may not include the rider benefits of your existing life insurance policy.
Impact on Claim Eligibility
If you surrender your existing life insurance policy or allow it to lapse, your existing life insurance policy will no longer cover you. In addition, depending on the terms and conditions of the new life insurance policy, the waiting period for certain benefits may need to be recalculated (eg medical, critical illness, suicide, or undisputed circumstances).
