Insurance Replacement Policies

Replacement of Health Insurance

• Agents must avoid misleading the insured when replacing health insurance policies.
• Thorough comparison of benefits, limitations, and exclusions between current and proposed policies is essential.
• The current policy should not be cancelled before the new policy is issued to avoid coverage gaps.

Coverage Gaps

• A coverage gap is prohibited; there must be continuous coverage during the replacement.

Pre-existing Conditions

• Pre-existing conditions refer to medical issues for which treatment was sought prior to policy issuance.
• Current health conditions may not be covered in the new policy due to limitations on pre-existing conditions.
• Although the Affordable Care Act eliminated pre-existing condition exclusions in many policies, such exclusions may still apply in Medicare, long-term care, and disability income coverages.

Underwriting Considerations

• Underwriting is crucial in the replacement process, evaluating the risk to determine coverage eligibility.
• The insured may believe a replacement policy is beneficial, but after underwriting, the premium and benefits may differ significantly from the original policy.

Example Scenario

• Robert exemplifies how age and health changes affect insurance premiums:
  • At age 25, he applies for insurance as a healthy nonsmoker, likely securing a lower premium.
  • At age 45, after a heart attack and smoking for 15 years, his premium will be higher, reflecting increased risk.
  • Transition from a potentially overpriced original policy to a new assessment leads to premiums based on current health and age, not on past factors.