In some cases the replacement of existing policies may be in the policyholder's best interest.

As a policy holder, you will need to sign a few sheets of paperwork. The hard part will be done by the insurance company which you are purchasing the new insurance policy from and replacing the old one.

When replacing an insurance policy, the new insurance company will consider the following points:

• Does the state in which the transaction occurs require a report to be filed with the Insurance Department and/or the client?
• Is the reason for the replacement valid?
• Is the substituted policy suitable?

Types of Insurance Product Replacement

An insurance product replacement occurs whenever a new insurance contract is being purchased under any of the following conditions:

• Annuity to Annuity. Exchange an existing annuity contract for the new annuity contract under the provisions of Section 1035 of the Internal Revenue Code ( "Tax-free" Exchange ).
• Life to Life. Exchange an existing life insurance contract for a new life insurance contract under the provisions of Section 1035 of the Internal Revenue Code ( "Tax-free" Exchange ).
• Life to Annuity. Exchange an existing life insurance contract for a new annuity contract under the provisions of Section 1035 of the Internal Revenue Code ( "Tax-free" Exchange ).

Note: An annuity contract cannot be exchanged for a life insurance contract.