Transferring a Life Insurance Policy

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.

The only thing consistent in life is that it will change. As you progress from one stage of life to another, perhaps you’re getting married or planning to have a second child, your life insurance needs will change.

You might be thinking of canceling or transferring your life insurance policy for a new one to support these changes in your life.

Here’s all the information you need to know and what to consider when life changes and you’re looking to change your life insurance to match these changes.

  • Your number of dependents have changed, and you need your insurance policy to support these changes.
  • 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.
  • When there is a change in your business structure and the life insurance policy was set up as a key person policy.
  • Estate planning considerations. The ownership structure of your life insurance policy can have possible tax consequences.
  • When you want your super fund to start paying the premiums, the policy owner will need to be either your SMSF or another super fund.

When would you consider transferring your existing policy?

Can you transfer a life insurance policy?

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.

Life Insurance Policy Memorandum of Transfer

Above 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.

Important Considerations

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 canceling 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.

For example, they will cancel your existing policy number xxx and give you a new policy number yyy with the same benefits. It’s important to note that you cannot transfer trauma or own occupation TPD cover into a super fund as these cover types are not permitted in a superannuation environment.

Can I switch Life Insurance Companies?

Yes, generally you can however you should never cancel your existing cover before the new policy is underwritten and inforce to ensure you do not have a period of no cover. Secondly things might have changed the new insurer might place an exclusion on your policy, or worse, decline the offer of cover.

Other Important Considerations

When looking to switch life insurance companies, you must inform the new insurer of this during the application stage. There are two primary reasons for this:

  1. You have an obligation under the duty of disclosure (as this question is always asked in the application).
  2. 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.

Can you transfer life insurance policies to another company?

No you cannot transfer life insurance policies to another company. You will generally need to cancel your existing policy and take out a new policy with the selected insurer. You will be underwritten again by the new life insurer for them to assess if they are able to offer you cover. Therefore, do not cancel your existing policy until the new one starts.

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.

Published: March 24, 2017
  • Policy Ownership

    Structure your life insurance policy ownership to suit your needs. Consider and compare the options available including joint, cross and self ownership.

  • Multiple Life Insurance Policies

    Generally, yes you can claim on multiple life insurance policies so long as you have disclosed your existing polices to subsequent insurers at the time of application.

Ask an Expert?

2 Comments

  • Don |

    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.

    • Russell SPECIALIST
      Russell |

      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.

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