Transferring a Life Insurance Policy
Typically, your life insurance requirements change throughout your life. If you find your circumstances are different and you’d like to transfer your life insurance policy to another person or company, you’ll generally be able to do so by completing a transfer of insurance form.
Published June 10, 2021
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- Your Options When Transferring a Policy
- Important Considerations Before Switching Life Insurance Companies
- Reasons You Might Want to Transfer Your Existing Policy
- Can You Transfer a Life Insurance Policy to Another Person?
- Is It Possible to Transfer a Life Insurance Policy to Another Company?
- Life Insurance Policy Memorandum of Transfer
Your Options When Transferring a Policy
If your personal circumstances have changed, you may be thinking of transferring your policy to a different person or entity. In these situations, you’ll generally have the following options available to you:
- You could change the policy owner on your life cover to another individual.
- Alternatively, you could transfer your policy to a different company.
Important Considerations Before Switching Life Insurance Companies
- Compare your existing policies features and benefits versus the features and benefits of the proposed policy which you are thinking of transferring in the Product Disclosure Statement to make sure you’re happy with the benefits that you’re losing compared to the new benefits you’re gaining.
- If you replace one policy with a similar policy, you might have the 13-month suicide exclusion removed, or the 90 days waiting period on select trauma events removed. However, refer to the relevant PDS to confirm whether this is the case for you.
- You will be underwritten or assessed again by the new life insurer to assess if they are able to offer you cover, therefore do not cancel your existing policy until the new policy starts.
- Once you’ve transferred your policy, it is considered a new policy, so you’ll typically need to ensure that you fully comply with your duty of disclosure. If you fail to comply with the new insurer’s duty of disclosure there are generally significant consequences.
Reasons You Might Want to Transfer Your Existing Policy
- You want to find cheaper life insurance.
- Your number of dependents have changed, and you need your insurance policy to support these changes.
- You’re getting a divorce. If your spouse was named as the owner of your policy or joint owner and you are divorcing, you might consider transferring life insurance ownership to your name.
- There has been a change in your business structure and the life insurance policy was set up as a key person policy.
- You want your super fund to start paying the premiums. In this case, the policy owner will need to be either your SMSF or another super fund.
Can You Transfer a Life Insurance Policy to Another Person?
Yes, generally you can transfer a life insurance policy to another owner by filling in a Memorandum of Transfer.The policy owner has entire control over the life insurance policy; decide who the beneficiaries are, the payment arrangements and the amount of coverage.
Therefore, you’ll need the policy owners’ consent for transferring the policy, and they’ll need to complete and sign the transfer document.
The process of transferring a life insurance policy is whereby the policy owner completes a memorandum of transfer to have the policy owner changed to a new person or entity. All existing policy owners must consent to the transfer and complete the memorandum of transfer form. This may be done for tax, premium funding or family planning reasons.
Is It Possible to Transfer a Life Insurance Policy to Another Company?
Yes, generally transferring your life insurance to another company is possible. However, you would first need to apply to your new life insurance company, wait to be underwritten and accepted and then cancel your existing policy and start the new policy with your selected insurer.
Why Would You Want to Transfer a Life Insurance Policy?
Typically, there are a few situations when you may think of switching to a different insurer. These reasons often include:
- Changes in your personal circumstances: Typically, you should be reviewing your life cover periodically throughout your life to make sure you have the right cover for your requirements. For instance, you may want to switch the owner on your policy if you’ve recently gotten a divorce.
- You no longer want to pay for your policy personally: Generally, you might consider transferring your policy to a different person or entity if you don’t want to pay your premiums privately but would like to transfer the policy to Super. However, you typically won’t be able to transfer the policy and will need to purchase a new policy.
- Your existing policy doesn’t suit your requirements: Many people consider transferring the ownership of their life cover if they find that the features and benefits of their current policy no longer suit their requirements. However, it’s important to look at the Product Disclosure Statements on both policies before making any decisions.
What to consider before transferring ownership
- There can be tax implications when transferring ownership of a life policy to someone who is not related to you.
- You can transfer a policy to Super, but technically you cannot transfer a Personally Owned policy to a super environment. Insurers can get around this obstacle by cancelling your current policy and then reissue you a new policy. Generally, you won’t need to go through any further underwriting. However, it’s best to check with the relevant insurer before you make a decision.
- You cannot transfer trauma or own occupation TPD cover into a super fund as these cover types are not permitted in a superannuation environment.
Life Insurance Policy Memorandum of Transfer
If you’ve decided that you’d like to go ahead and transfer the ownership of your life insurance policy, then you’ll typically need to request a memorandum of transfer from your insurer. You’ll then need to complete the form and return it to the company to complete the transfer.
Source: mlcinsurance.com.au (June 2021; This is an example of a memorandum of transfer from MLC; however you will need to request the specific one for the relevant policy you hold.)
Remember, nobody knows what will happen in the future. If you do decide to replace or transfer your life insurance policy contact us for a quote and receive all the information required to make an informed decision.
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If your spouse created a last will and testament that states she is leaving everything she owns to her husband in the event of her death, can four term life insurance policies on two children of theirs and two relatives (four policies total – of which are the four insured individuals) be transferred to her surviving (her surviving husband) when she passes? The state where the term life insurance policies originated is Alabama.
Hi Don
Great question, however please note we are based in Australia so I am not sure how valuable may answer will be to you.
In your situation above in general the term life insurance policy would be an asset of the estate, therefore if the policy owner passed away the executor would have to distribute the assets “Policy ownership” according to the intentions in the will.
To understand how your scenario works in Alabama I would call the relevant insurer and ask to talk to their technical team and talk through your scenario with them as I am sure they would be able to assist.
I have a life insurance policy with Asteron, in my personal name. Can the policy owner be changed so that I can pay it from superannuation?
Hi Leigh,
Thanks for your question.
Generally, you can transfer your life insurance ownership to your Super, but to do this you’ll typically need to cancel your current policy and then have the company, in this case, Asteron, reissue a new policy. Usually, you won’t have to go through any further underwriting, however, please check with Asteron before you cancel any policies.
Deciding whether to have your life insurance inside or outside superannuation can be complex and you should carefully consider the pros and cons of both.
For example, when your super fund becomes the policy owner, any benefit paid is paid to the fund and a number of conditions will need to be met before you or your beneficiaries can access the benefit. On the other hand, generally, any life insurance premiums paid for by your fund are tax-deductible to your fund.
If you would like a consultant to provide you with more information, please fill in the quote form above or give us a call on 1300 135 205.
We look forward to helping you make an informed decision.
Hi, is there a minimum age that someone must be to be nominated a Term Life Policy owner?
Hi Gary,
Great question! Because the policy owner is also the person responsible for paying the premiums, a permanent Australian resident must generally be between 18 and 75 (depending on the insurer) to apply for term life insurance.
However, you usually have a few policy ownership options. It’s best to review these options before making a decision because the owner of your policy is also responsible for nominating beneficiaries, updating details, and can cancel the policy at any time.
If I transfer my life insurance policy to my son can he put me down as successor?
Hi Lorraine,
If you’re asking whether your son, as the new policy owner, can name you as his beneficiary to receive the benefit, then yes he can when he is made policy owner.
I have transfer of ownership form and identification of individual form as my father who held the policy for me has passed. Do I need any other forms?
If I change my Life Insurance policy to another company will I get the money I’ve paid to the existing company.
Hi Lauren,
That’s a great question, thanks. Typically, you’ll only get money back from your existing insurer if you’ve paid any of your premiums in advance. As term life insurance does not have a cash component, it typically does not have a surrender value. There are very few endowment type policies in the market, so if you took out your policy 20+ years ago your policy may have a surrender value. If this is the case, you may want to contact the insurer to find out if it has any value before you cancel or transfer your policy.
can I sell my life insurance plan as life settlement in australia and how to do it?
Hi Michaela,
That’s a great question. How old is your policy, some very old policies taken out pre 1990’s have a cash value. Depending on the type of policy and the insurer. Typically, if your policy was taken out after this type you would generally not have a cash value. Typically, you’ll only get money back from your existing insurer if you’ve paid any of your premiums in advance. As term life insurance does not have a cash component, it generally does not have a surrender value. Please contact your insurer dircectly.