Many people have a misunderstanding of what information the insurance industry has on them and how it will be used against them.
Again last week a client was afraid to apply to a different insurance company to make a change to her health insurance that would save her $97 a month. She was afraid that if one insurance company discovered that she was taking a certain medication, they would share that with every other insurance company and she would be prevented from ever getting insurance in the future.
The thing that scared her was a rumor about an organization called the MIB (Medical Information Bureau.) That is the central clearing house of information for member insurance companies. Click the graphic above to learn the truth about what information is kept by the MIB and how insurance companies can use it.
Her concern is just one of the considerations people need to think about anytime they want to change insurance companies. In this post I want to answer the question, “When is it appropriate to change insurance?”
Changing insurance companies, just for the sake of changing can be dangerous for a couple of reasons.
First, if it is not done right, it could result in losing what you already have and not being able to get it back.
If you are going to change insurance companies, always request an effective date at least 30 days away. That should give your new insurance company time to finish their underwriting and get your new policy to you for your approval before you cancel your old insurance policy.
Also, remember that while your insurance agent may be able to help you obtain the new insurance, he is often not able to cancel your old insurance policy.
Your policy/contract is with the insurance company and not your insurance agent. He will need a written letter with your signature and date before he is able to help you cancel your previous policy.
The second major reason for not switching insurance companies just for the sake of switching is that it can be an illegal act by an insurance agent.
If there is a true benefit for you, such as saving a $97 a month premium increase, there is a logical reason for an insurance agent to help you make a change.
However, if the only reason an insurance agent suggests replacing your existing insurance is to generate new commissions, he is guilty of “Churning.”
“Churning” is an illegal activity that insurance agents perform when they replace a perfectly good insurance policy for the sole reason of generating more commissions. Insurance agents must be able to prove that your new policy is for your benefit and not just theirs.
Replacing a current policy with something else is not always a bad idea. With new products being introduced all the time and insurance companies regularly increasing, especially on health insurance, it is not a bad idea for you to shop around every couple of years. What was a good policy 5 years ago, may be obsolete today.
If you will find yourself with better benefits or a lower premium by switching to another quality insurance company, there is no reason for you not to switch.
Just remember that if you do change from one insurance company to another you should always be certain that you will be comfortable with that insurance company if you become uninsurable in the future.
Replacing your existing policy is not always a bad idea. Often it can be an upgrade. You may be able to get better benefits or a lower premium by periodically shopping. If you are still in average health for your age, it will not hurt you to periodically explore your options. With all the changes that have happened to health insurance in the last 4 years, I typically recommend people to review their options every 2-3 years. The important thing to remember is that it should be your idea and not your insurance agent’s.
If you are able to find a better option for you remember 2 warnings.
- Never cancel your existing policy until you have its replacement in your hands.
- Always make certain that you would be comfortable with your new insurance company if you become uninsurable in the future and unable to change.