Full Term Rewrite

A full term rewrite in insurance refers to the replacement of an existing insurance policy with a new policy for the same coverage, but with a new policy period that starts immediately upon the issuance of the new policy. This means the original policy is canceled, and the new policy takes effect, often with a new policy term (e.g., another year) starting from that point. This may happen if there is a material error in the policy is issued or due to insured’s request or change of circumstances.

Here’s how it typically works

Reasons for a Full Term Rewrite:

• Better Coverage or Price: The policyholder may find a new policy with better coverage, lower premiums, or more favorable terms.
• Change in Circumstances: The policyholder’s needs may have changed, requiring a different type of coverage or different limits.
• Dissatisfaction with Current Insurer: The policyholder may be unhappy with their current insurer’s service or claims handling.

Process

• Application: The policyholder applies for a new policy with the same or a different insurer.
• Underwriting: The new insurer underwrites the application and assesses the risk.
• Policy Issuance: If approved, the new policy is issued with a new effective date, and the old policy is canceled.
• Premium Adjustment: The policyholder may receive a refund for the unused portion of the premium on the old policy, or they may need to pay an additional premium to cover the new policy period.
• Distinction from Renewal: A full term rewrite is different from a policy renewal. With a renewal, the existing policy continues with updated terms and premiums. In a rewrite, the old policy is terminated, and a completely new policy is issued.

Key Considerations:

• Coverage Gap: It’s crucial to ensure no gap in coverage occurs between the cancellation of the old policy and the effective date of the new policy.
• Policy Benefits: Rewriting may affect benefits accrued under the old policy, such as claims-free discounts or loyalty rewards.
• Full term rewrites can be beneficial for policyholders seeking better coverage, pricing, or terms. However, it’s important to carefully consider the implications and ensure a smooth transition to avoid any lapse in coverage or loss of benefits.