Quick 1035 exchange logistical question

[T in CA]

A young producer I bumped into had the following question...I am 99% I told him right, but figured I'd bounce it off the group:

He is doing an exchange and the new carrier has approved everything and transfer paperwork is at the old company. During this time period the policy went into the grace period. The client does not want to pay the large annual premium since he is surrendering. My strong sense is that if the exchange happens during the grace period the old policy is technically still in force and all will be well.

In general, are there strict guidelines or can an original insurer drag their feet to make clients pay premiums right before they surrender? This doesn't seem like it would be allowed.

Thanks for anyone's insight!

 

[Todd King]

You can almost bet the original insurer will drag their feet. They don't want to give up that money and they will hang on to it until the last minute. This has most always been my experience.
Calls to the old company might help. Sometimes, you can call the old company and they'll tell you something along the lines of...well, we need this form or that form or something else that they didn't bother to alert anyone one of it. Why? Because they are still hoping the 1035 exchange doesn't take place. Sometimes you just have to stay on those companies.

 

[goillini52]

A young producer I bumped into had the following question...I am 99% I told him right, but figured I'd bounce it off the group:

He is doing an exchange and the new carrier has approved everything and transfer paperwork is at the old company. During this time period the policy went into the grace period. The client does not want to pay the large annual premium since he is surrendering. My strong sense is that if the exchange happens during the grace period the old policy is technically still in force and all will be well.

In general, are there strict guidelines or can an original insurer drag their feet to make clients pay premiums right before they surrender? This doesn't seem like it would be allowed.

Thanks for anyone's insight!

Have him call the old company with the policyholder.

 

[Allen Trent]

Really don’t want to mess with risking coverage, etc.

Is the new policy approved?

if client pays the premium with the old company the premium will go into the cash value. Even if WL premium, the surrender value will jump for all the unused premium.

Could change from annual to quarterly to minimize the issue.

if WL, could change the dividend option to pay the premium

If UL type policy, could change planned premium to 0

if WL, here is what you are risking: if true 30 day grace period expires, client will not only lose coverage & not have any with new company, but the existing WL likely will default to go non-forfeiture & most carriers default extended term coverage