What could be a potential disadvantage of life insurance replacement?

What could be a potential disadvantage of life insurance replacement?

• A. It may offer better benefits
• B. It can lead to increased costs or loss of existing benefits
• C. It simplifies the policy management process
• D. It guarantees lower premiums for life

Answer: (B)

A potential disadvantage of life insurance replacement is that it can lead to increased costs or loss of existing benefits. When a policyholder decides to replace their current life insurance policy with a new one, there are several factors to consider that could result in negative financial outcomes. For instance, the new policy may come with higher premium costs, especially if the insured's health has changed since the original policy was purchased. Additionally, the policyholder may lose out on accrued benefits such as cash value or dividends that were built up in the original policy. Furthermore, some policies have surrender charges that can diminish the financial value of the policy if it's terminated early. Therefore, while a replacement might promise new benefits, it is essential to weigh these against potential drawbacks such as higher long-term costs and the forfeiture of established advantages.

A potential disadvantage of life insurance replacement is that it can lead to increased costs or loss of existing benefits. When a policyholder decides to replace their current life insurance policy with a new one, there are several factors to consider that could result in negative financial outcomes.

For instance, the new policy may come with higher premium costs, especially if the insured's health has changed since the original policy was purchased. Additionally, the policyholder may lose out on accrued benefits such as cash value or dividends that were built up in the original policy. Furthermore, some policies have surrender charges that can diminish the financial value of the policy if it's terminated early. Therefore, while a replacement might promise new benefits, it is essential to weigh these against potential drawbacks such as higher long-term costs and the forfeiture of established advantages.