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Can You Transfer Life Insurance Policies to Another Company?

Yes, It is possible to transfer your life insurance plan to another company in India. However, few rules and regulations should be abided by to make such type of transfer possible. In order to transfer a life policy to another insurer in India , a policyholder is required to be aware about the process where the cash value of the existing policy documents is transferred to other company to make the transaction legal. Term insurance plan allows the insurance company to switch theie policy to another insurer without ending their existing plan. 

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Criteria to follow for transferring life insurance policies to another company

  • Transfer of cash value - To make such a transfer possible, several procedures and regulations must be followed. To transfer a life insurance policy to another firm in India, a policyholder must go through the procedure of transferring the cash value of the present policy contract to another in order for the transaction to be legal and qualifying under the laws.

  • Compliance to Code 1035 - It is possible to transfer term life insurance policy to another company by following the guidelines of Internal Revenue Code Code 1035. This Code provides a tax-free transfer of monetary assets if the financial asset is exchanged in accordance with the criteria and regulations of Code 1035. As a precaution, the policyholder should make certain that the exchange completely follows the norms and restrictions of Code 1035; otherwise, complications regarding taxable profits and other concerns may arise. 

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Life Insurance Policies That Qualify For The Code 1035

Here are some of the life insurance plans that can be transferred to another business under Internal Tax Code Section 1035.

  • A life insurance policy, in return for another life insurance policy

  • A life insurance plan, in return for an endowment plan

  • The exchange of a life insurance policy for an annuity policy

  • A life insurance policy, in exchange for a qualified long-term care policy

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Reasons of Policy Transfer From One Company to Another

Out of the various reasons due to which a person would opt for a new insurance company/institution for his policy transfer, below are some which are more relevant from the perspective of a buyer, who wishes to invest a large portion of his finances into something that will safeguard his life, along with his loved ones’.

  • Better Returns - When a policyholder discovers that the new company offers a higher interest rate than his present insurance provider, the customers will almost certainly choose the higher return. Market competition is, thus, one of the primary reasons for such transfers. Policybazaar gives a comparison of the top 15+ insurers offering great insurance plans and benefits so that you can make an informed decision, and gain an advantage by choosing the best policy for yourself. 

  • Policy/Investment Attributes - If a policyholder discovers that other insurance service companies/providers provide better investment opportunities and additional features, such as more riders, a greater number of free fund switching options in the case of ULIPs, or some other benefits, they may want to move to a different insurance provider.

  • Customer Support - Client satisfaction is still one of the primary reasons insurance companies lose customers. Assume a policyholder is dissatisfied with customer service and management of the term insurance plans. In that event, they will almost certainly migrate to a different company with a higher and better market reputation.

Wrapping it up!

While you transfer life insurance policy to another company/provider, keep in mind that you will be purchasing a whole new policy altogether. Life insurance does not have the concept of portability. With the new plan, you will be considered as a new client. The rates and underwriting criteria will be determined based on your age, annual salary and existing health status. It is recommended to choose a plan that provides the basic life insurance benefits, and then select a second plan with riders of your choice. If you decide to change later, you may either replace the one with additional covers or just purchase an additional plan for a different amount of cover. In either case, ensure that you fill out the application forms with utmost attention.

FAQs

  • How can someone transfer insurance from one company to another?

    Ans: You should approach the insurance company or submit a transfer letter/mail to the manager of the company and request that the policy be transferred. You may also obtain the application for insurance policy transfer from your insurer's website.
  • Is it easy to transfer a life insurance policy from one company to another?

    Ans: It is not an easy process to transfer life insurance policy from one company to another, but it becomes less complicated when the customer support provides assistance and helps resolve your queries.
  • Are life insurance policies transferable to new companies?

    Ans: Yes, transferring life insurance policies from one company to another is possible. But, you must follow the guidelines of Internal Revenue Code Code 1035 to allow seamless transfer.
  • Is it a good idea to switch life insurance companies?

    Ans: If you think you are getting better opportunities and benefits in a new insurance institution/company, you may opt to change from the older one to the new one. But, you must keep in mind to check all the regulations carefully before doing so.
  • How to calculate the term insurance premium online?

    Ans: You can easily calculate the term insurance premium online by using the term insurance premium calculator online tool
  • What are the benefits of term life insurance?

    Ans: Here are 4 common term insurance benefits:
    • Low premium rates
    • Tax Benefits
    • Death Benefit
    • Long term coverage
  • What is term life insurance?

    Ans: Let's understand what is term life insurance here. Term insurance offers financial protection for a certain period to the policyholder, thereby, offering a lump sum payout if the policyholder unfortunately passes away during the policy term.
  • What are the key features of a best term insurance plan in India?

    Ans: Below mentioned are the key features of a best term life insurance in India:
    • Affordable premium rates
    • Long-tenure life protection
    • Easy to understand and buy
    • Riders availability
    • Whole life protection
    • Tax benefits

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