Apart from comparing cover and costs, what other key factor should usually be considered if a financial adviser intends to recommend that a client cancels an existing term assurance policy and replaces it with a new one?
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A. B. C. D.B
When a financial adviser is considering recommending that a client cancels an existing term assurance policy and replaces it with a new one, there are several key factors to consider. Apart from comparing cover and costs, the following factor should also be considered:
B. The underwriting requirements
Underwriting is the process of assessing the risk of insuring a person's life and determining the cost of premiums for the policy. When a person applies for a new term assurance policy, the insurance company will need to review their health, lifestyle, and other factors that affect their risk level. This process is known as underwriting.
If the client's health has deteriorated since they took out the existing policy, or if they have developed a new health condition, they may not be able to get the same level of cover or the same premium rate as they had before. This could result in the client being underinsured or paying higher premiums for the new policy.
Additionally, if the client cancels their existing policy before the new policy is approved and underwritten, they could be left without any cover if the new policy is declined. It is important to ensure that the new policy is approved and in force before cancelling the existing policy.
In summary, when considering whether to recommend that a client cancels an existing term assurance policy and replaces it with a new one, the financial adviser should take into account the underwriting requirements to ensure that the client will be able to obtain the same or better cover at a similar or lower cost. This will help to ensure that the client is not left without cover and is not paying more than necessary for their insurance.