I often got this question about life insurance from readers, prospects and clients — Should I lapse my existing policy in order to buy a new one?

My answer is always a big NO. You can buy a new life insurance policy, but surrendering your existing one is always not to your benefit.

Why you shouldn’t surrender your existing policy

Photo by kiddharma

1. Your existing policy was bought “previously”, which means you are younger at that time. The premium rate should be cheaper if you are going to get it now.

2. Cash value of an insurance policy starts to build up and accumulate significantly at least after 2 years time. Refer your insurance policy bonus payment, surrender value which can be found on the sales illustration or inside the policy. In other words, during the initial years, there is not much money left in your policy. If you lapse it and buy a new one, you are actually putting yourself back to previous condition. Don’t “reset” your insurance policy.

3. If you couldn’t afford to pay the premium, you can opt for premium holiday, or automatic premium loan. Pay it later when you are in a better shape financially. Just don’t surrender it.

4. If your existing policies don’t fulfill your protection needs, you should buy new policies that compliment the existing policy features, not replacing them.

5. Insurance agents get the biggest chunk of sales commission during the initial years. When you can’t afford to buy a new policy, don’t listen to your agent who try to persuade you to lapse the old policy in order for you to afford a new one. If you really need that much protection, I am sure that you will find ways to afford the premium. You can cut other expenses, but not your existing policy premium.

Replacement of Policy

As described by an insider who works in the Conservation Unit of the insurance industry:

In January 2005, Bank Negara Malaysia issued a directive which focuses on the Replacement of Life Insurance Policies. In simple terms, the replacement of policy refers to the act of replacing an existing policy with another policy.
The replacement being done through a various means that includes lapsing or non-payment of premiums, or, surrendering of the original policy, modifying the original policy so as to reduce its premium amount, allowing the original policy to go in Automatic Premium Loan, and a few more conditions as defined in the directive.

It was also stated clearly at Life Insurance Association of Malaysia (LIAM) website:

It would not be in the best interest of the policyholders to replace their existing policies. This is because they will probably have to pay a higher premium for the new policy since they are older. The cash value of their policies will take time to build up and the 2-year period of contestability will begin again.
LIAM has issued a set of Rules on Replacement of Policies to discourage such practices and to protect the interest of policyholders. Under these rules, an agent would not receive any compensation for the new policy that replaces another policy within less than 1 year before or after the original policy is discontinued.

More details click here (pdf).


The worst advice you might get from an insurance agent is “to lapse your existing policy“. You might have bought a policy that’s not according to your “want”, but I am sure it can be packaged someway to meet your real needs.


Personal finance author and trainer

    54 replies to "Beware of the Worst Advice from Insurance Agents"

    • M.D. F

      For those who are not so knowledgeable about insurance. Here is my advice if you have an existing policy that you are not so happy about and thinking to “upgrade” your old policy. Or maybe you bought it when you were still stupid about insurance and didn’t really properly look into it. JUST REPLACE YOUR POLICY. And this is coming from a former insurance agent with AIA(I quit and did my own business btw if you need to know). replacement of policy would ONLY hurt the insurance agent, NOT YOU. If your old/current policy doesn’t satisfy you, why waste money on it or try to ammend it. Because even if you do, it will sti follow the old policy rules. For example, before AIA have policy called A-life link, but now they have a new product called A-life link 2 which is significantly better especially for the medical coverage. If you have the old A-life link but want to upgrade the medical coverage like the one in A-life Link 2, you cant. It will only follow what the old policy offers. Agents would recommend people to “compliment” the policy by making a new policy. But when the time comes to claim, you can only claim from 1 policy at a time. So why waste money on 2 policy when you only need 1. And you won’t even need that much medical coverage anyway. Yes some points in this article is true, for example with new policy, you will refresh you allocation of premium and investment from start. But you don’t buy insurance for the long term investment returns. You buy it for the protection it give now. The investment returns are bonus when you retire. When I was an agent with AIA, I was never bother by my own commission. I ALWAYS RECOMMEND what is best for my clients the same as I always want the best for myself. Yes I never really earned much from my agent days. But all my clients are happy clients until now. They whole heartedly trust my judgment and recommendation until today. I still help them out as much as I possibly can even now that I am not their agent anymore.

      • KCLau

        Thanks for the comment. I agree with your view that when the best for policyholder is clearly to replace a policy, you shall do it.
        Just beware of unethical agents who are trying to find your money that can pay for his “new business” premium.

    • mala

      will agent gets commission if i repay my automatic premium loan?

    • none

      Your links to on replacement policy no longer work. Please update
      What is replacement policy means?

    • Jay

      I have bought a Great Eastern EduScholar ( endowment fund ) . It’s a 15 years plan ( RM80,000)

      I realise I am kind of stupid because I just realise the paid out after 20 years could just get paid out of RM88,000.

      Don’t understand why such policy could be approved. Also myself so stupid to purchase it

      I have paid 3 years premium of RM16,000. If surrender now could only get RM7,000.

      Pls advice

      • Snox

        Basically this is how insurance company collecting money from the public and they use that money to invest in the FD/Government Bond and so on.

        I would say most of the people has misled by their agents and got into this kind of “saving plan” trap. And the Agents will say “you got your return at the end, and the company cover you for that 20 years, it’s win-win situation”. But then 20 years your return is only that pity 10+%. Ultimately, Insurance companies has used your fund to get more profit for themselves.

    • Jephanie

      Good afternoon,I had one case that my insurance agent that lie to me when sell insurance policy to me last 5 years. And I had been complained since this year February to Bank Negara and OFS but the insurance company (HLA) still don’t have any intention to refund the money that I requested (RM3500). And now I going to terminate my policy contract this 18 May. But I still not give up in my case. What is your advice? Do you know who organisation can handle this kind of case beside BNM and OFS?

    • Afifah

      My mom has taken prudential medical insurans for me when i was a kid. The premium now is RM300+. Quite low annual (150k) and lifetime limit(700k).

      I’ve checked with aia and the plan is quite good RM200+ with 1.5mill annual limit and no lifetime limit.

      Should I change to Aia or review my prudential plan? It seems that the prudential agent has no effort to review my plan. Even the prudential plan is no longer existing and not sufficient to cover for today’s hospital fees

      • KCLau

        Nowadays, the latest medical are more competitive and comes with better benefit. It is best to do an upgrade.

        • Vanessa

          Hi, May i know what upgrade means buy a new policy? or you can upgrade an existing policy? Thanks

          • KCLau

            It is increasing the existing policy (same policy number) in terms of coverage, riders and possibly premium too

            • Wee Siong

              Vanessa, you can upgrade your Prudential medical plan on your existing policy.

    • Ling

      I’ve a plan >10 years and I’m 31 next year.

      Monthly premium –> RM160
      BSA–> rm72k only
      Annual medic limit –> rm90k
      Lifetime limit –> RM300k

      One GE agent ask me to let go of AIA.
      Monthly premium –> RM310
      BSA–> rm500k
      Annual medic limit –> rm990k
      No lifetime limit

      Is it advisable to do a switch, or would it be better for an upgrade?
      I did the Coverage-to-Premium (CTP) calculation and obviously, both are <150. 🙁

      ON PA Insurance
      I also have a PA insurance plan, is there any advice on this or articles which I can read on?
      I have one which is under AIA, RM233 p.a.

      I went to comparison sites which mentioned how much each plan are insured (some went up to RM3m) and I would need to pay around RM1500 p.a. (a big jump). Should I?

      • KCLau

        You can ask AIA to give you a competitive quote too. I am sure they will have something more or less compatible.
        Then you don’t have to reset the 6 years high commission period paid to the agents.
        For PA, you can easily find other General Insurance provider providing 1 million policy with competitive premium. Do a comparison to upgrade to one that is at least 10 times your annual income.

    • Curious

      Hi! My agent advised me to withdraw and close my 10+ years plan to sign up with a new plan. Whereby the balance will be transferred to the new account, and that the 30k will cover the payment for first year, and the monthly payment for the second year will be lower than my current plan. Better coverage as well.
      Does that sound too good to be true? What should i question him?

      • KCLau

        You will need to understand what is the new plan coverage, and type of plans. As the variables can be very much difference. I suggest that you also talk to some other agents or financial planners to understand the situation before making changes.

    • Sharmilah

      I have Zurich Medical + investment link policy which i have paid for past 9 years for both myself and my daughter but find it not comprehensive to newly proposed Prudential plan. is it advisable to terminate our Zurich plans to move on with Prudential? The surrender value for Zurich is 1/3 of my premium paid and 1/2 of my daughter’s. My Prudential agent is asking me to allow my Zurich policy to run for 1 years on Cash Value without paying the semi-annual premium -is it wise decision?

      • KCLau

        Option 1: Talk to Zurich agent. You may be able to upgrade your existing policies – then you will save the commission on the first six year of starting a new one. Compare the plan upgrade with the Prudential proposal before making a decision.

        Option 2: You go with Prudential.. and there is a reason for letting the existing policy run for another year. It is because when an old policy lapsed within a year of a new policy taking place, there will be no commission for the new agent. So you will be obligated to let this happens, if not, your new agent won’t get paid for all the work.

    • PJ

      Hi KC,

      My husband and I have been paying a monthly premiums of RM 650 for Life Insurance policies under GE with a sum assured approx. RM 100K each plus RM 20K for death due to accident. Recently, an agent approached us for a Life Insurance product under AIA which pays a sum assured of RM 500K each plus another RM 500K if death is due to accident. Monthly premium is RM 530. Is it wise to surrender my GE premium and go for AIA? Lower pay with higher sum assured.

      • KCLau

        Insurance is meant for protection. Go for the highest protection with the least premium possible.

    • baadhshah

      Hi ,
      Reading your article is beneficial for me but
      Seeking your advice on below,
      2 months ago, i bought a prudential life insurance plan for myself and paying 214RM per month ,but now i am thinking of reducing premium from 214RM to 100RM per month , is it doable or not or need to terminate existing one then need to apply for new one .

      Thanks in advance

      • KCLau

        I believe it can be done to downsize your premium, but probably the protection had to be reduced too.

    • Casey

      Hi, I bought a new AIA policy on Oct 2017 (A-Lifelink) and my agent told me not to cancel the old policy which I bought on Mar 2014. I still have some value with my old policy and I was thinking to get the money for other purpose. My agent told me that is wise to just leave it till no value and eventually the policy will terminate by itself due to my new policy is still “young”. What will you advise? Continue leaving it as it is or cancel to get what ever value remains.

      • KCLau

        There is a ruling that if you have a lapsed policy within a year overlapping a new policy inforce, the agent will not get any commission.
        I think that’s the reason your agent advise you to do that.

        • Eve

          Hi, I have the same doubt as casey’s, since we have bought anther new policy, can we insist to terminate the old ones and get back the remaining cash value?

          • Jaclyn yeo

            Yes you can , but for me no advise, every new policy has waiting period so u need to take note the day. IF u want to surrender old policy I will advise after waiting period only surrender.

    • Paul


      firstly thanks for having this forum of sorts and answering our queries.

      I have an insurance with Prudential for a medical card that i had subscribed to when i was 27 years old (I am now 35) which covers me for RM225k limit with a RM75k annual cap, with a life insurance & TPD of RM100K each for a premium of RM330. Upon surveying new policies out there I have found that AIA & Great Eastern now offer much better deals i.e. RM 1.1 Million annual limit with no lifetime limit, with life insurance & TPD of RM 100k. What is even more shocking is the premium is cheaper than I have been paying thus far. My wife who took a similar medical card as me since 2013 is also in the same boat, but her surrender value is of course significantly lower. I had questioned by agent on my findings where he proposed to upgrade my current plan (with Prudential) to have a medical card limit of RM 1 Million but this would require me to pay 20% of any medical cost beyond the RM 1 Mil cap. I am obviously tempted to opt out of Prudential or is there something to good to be true with AIA & Great Eastern as Prudential cannot be so poor with the products that it is offering. Please advise.

      Thanks a million!

      • KCLau

        Nowadays, the insurance products are pretty competitive. I believe Prudential also offer very competitive package. Maybe you can ask for another Prudential agent’s advice on the possibility to upgrade without extra premium and still get competitive plan.
        That’s the first choice – since you don’t have to reset the waiting period. And your premium now is 100% allocated, unlike a new plan which will go through low allocation for the first 6 years to cater for agent’s compensation.

      • Jaclyn yeo

        If not mistaken , AIA and PRU has sub limit on cancer and kidney failure treatment (per life time).

        If want to buy medical insurance , need to check the insurance company background to make sure they have enough fund to put in claim pool.

    • dinie

      I have bought an Investment-Linked Product from AIA, with monthly contribution of RM1378 n oct 2016. Earlier this year, the agent came up with a better plan but it has to be under different policy holder. so we signed up under my husband. The agent said i can terminate the previous account and being so naive… i believe that i will get back at least 70% from my total paid contribution. The truth is…i have been returned less than 30% from total contribution paid for the past 15 months.
      I felt so unfair and now am thinking of cancelling the new policy plus medical policy i have with AIA.

      • KCLau

        The agent probably didn’t explain to you that for the initial 5-6 years, your premium paid has a big portion contribution to agent’s commission. Therefore, the initial few years has not much cash value, normally <50% of what you paid.

    • mike

      hello mr KCLau,

      last week(friday), i ve terminate my GE policy… i just wanna ask how long does it takes for GE to clear the surrendered cash calue into my acc..?

      thank you

      • KCLau

        Normally within 1-2 weeks

    • Samantha

      I think i have bought the wrong insurance (life) for all my 3 daughters which i have paid for almost 10 years and i would like to surrender them as i have other policies which i need to pay, total per month premium paying currently is abt RM1200.

      1. What is your advise on my decision?
      2. What is course duration, qualification and cost if we were to take up insurance agent license?

      Would be delighted to hear from you. Thanks.

      • KCLau

        Hi Samantha,
        1. I can’t advise on your decision because you will need to weigh the pros and cons of each policy and your budget to decide.
        2. To get an insurance agent license, you need to study and pass two exams, which is not difficult. There will be minimum production maintenance each year to sustain.

    • wan

      Hello..i nk tnya u.
      1.my customer dah ada policy n not satisfy dgn previous conpany insurance.dia dah join 2 tahun.so dia join dgn i…adakah i dikira ROP?
      2.dalam promote insurans…blh ke bg diskaun or rebate to customer?deduct own comision

      • KCLau

        @Wan, regarding your question:
        1. That is considered ROP too, although between different insurance companies, there is no linking of the system to auto-detect the ROP.

        2. It is against agent’s code of conduct to provide discount.

    • martin

      beware of those spm level and “Pasar malam” agents which knew nothing in finance. they just ant to be get rich in selling insurance policy and they never care about your financial status.

      I be cheated by a useless Great eastern agent and it is sucks that i have to paid he for his low quality service.

    • netmask8

      Greetings & G’Day,

      1. Take insurance exams & join as an insurance agent.
      2. Ask your senior insurance manager about ALL your doubts/ questions abt insurance.
      3. Plan/ Buy own insurance plan for your family and yourself using your own insurance agent membership.
      4. Before your insurance agent membership got terminated( usually 6 months with no sale figure), buy another insurance plan for your family or yourself.
      5. Example :- Jan 2010 Buy Life Endownment Plan, May 2010 Buy Life Plan for Wife, Oct 2010 Buy Life Plan for Children, March 2011 Buy Personal Accidents(PA) plan, Aug 2011 Buy 36 critical illness plan for Yourself, Jan 2012 Buy Medical Card for Wife …etc ( Medical Card, Investment-Linked Plan, Saving Plan )..

      You may SAVE commision for 2 years from the premium paid.. May apply this on unit trust too.. Take unit trust agent exam, learn from senior unit trust mgr and buy own unit trust.

      Have a great day. Little savig sometime helps.

      • KCLau

        Nice tips. As long as you don’t mind spending the time to study and past the exam, this can save you some money.

    • Sid

      hi, i’ve bought a couple of policies from a friend but recently when i was looking through statements i noticed that ive been paying for duplicated policies (e.g death and crisis benefits in both the policies and many, many riders)
      Should i merge the policies or surrender the newer one and modify the older policy to add the necessary policies…..in the case of merging will the premium rate be higher?

      • KCLau

        Technically, insurance companies can’t “merge’ your policies. Death and 36 critical illnesses coverage is claimable on the total amount purchase, regardless of how many policies you have. So there is no trouble with that.
        I suggest that you talk to a trusted insurance agent and have him/her analyze all your policies. I can introduce a trustworthy agent to you if necessary.

    • Lyn

      Thank you very much for your prompt feedback

    • Lyn

      What i am thinking of is to reduce the premium on this policy, and I can work with the additional premium to puchase a traditional plan. I hv addition RM245. (RM345- RM100). If by RM100 i can still enjoy the same protection, I can keep it this way , right? The impact wld be my investment value will be lesser since I am already paying a lower premium, right?

      Quote from your previous reply:
      “So if you reduce the premium, you will have to go through the first 6 years “commission period” when you increase it later in life.”

      Will I be affected shd I not increase my premium nor sum assured in future?

      • KCLau

        Hi Lyn,

        I think you are planning it fine in this way.
        You won’t be affected if you don’t plan to increase your insurance premium on the same investment-linked policy.

    • Lyn

      My husband policy with Prudential was a protection of only RM120k, with a lot of unnecessary riders. He is paying RM345/mth since 2005. So i am asking the agent to reduce the premium from RM345 to RM100. And surprisingly she says OK and it is do-able. So any impact to my husband policy?

      • KCLau

        You see, insurance agents got the commission on the first 6 years.
        After you’ve paid the premium for 6 years, the 7th year onward all your premium paid will be fully allocated to your investment -linked fund.
        So if you reduce the premium, you will have to go through the first 6 years “commission period” when you increase it later in life.
        I would say if that extra premium you paid doesn’t affect your cash flow, just keep paying to make it a form of force-saving.

    • mike

      If you feel not 100% happy about the existing one in terms of coverage, protection, etc.
      Go for better insurance company, with better protection or plan with the same premium.
      The important is the value of your money and the protection for your life.

    • KCLau

      Normally, you can change the policy type within one year

      Via iphone (爱疯)

    • yhchong

      I heard we can 'switch' to another policy type within the same insurance company if we are not 100% happy about the existing one in terms of coverage, protection, etc. So instead of lapse the existing, we could do a 'switch' . Is this true?

    • 10ha

      i’ve asked my agent, he said that to reduce premium, it’ll reset the policy again, and based on current age, which means the premium is higher in a way.

      I want to ask how to determine whether a person is over insured, cause currently i’m paying rm300+ monthly premium, which is equivalent of my 10% salary.

      • KCLau


        I don’t think it will reset your policy. I am sure that Great Eastern policies won’t be reset like you said for premium reduction. If it is a traditional policy. it will be partly surrendered. If it is an investment-linked policy, it works about the same too.

        If you are paying 10% of your salary for insurance protection that’s over your need, it might be over insured. But I doubt that you will be over-insured. Normally if someone pay a lot more than 10% for full protection plan, it might be the case of over-insured.

    • […] If you’re new here, you may want to subscribe to my RSS feed. Thanks for visiting! Paying premium for life insurance policy as long as possible is one of the best form of saving you should have. I am talking about your old policies, your existing policies which are still in force now. Perhaps you stopped paying the premium because it reaches the “critical years”, or you plan to lapse the existing one in order for you to afford new insurance plans. But don’t be stupid. Beware of the worst advice from insurance agent. […]

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