What can be a consequence of replacing an existing life insurance policy with a new one?

When an individual decides to replace an existing life insurance policy with a new one, one of the potential consequences is the presence of a surrender charge. This charge is typically applied when the policyholder cancels their existing policy before the end of a specified period, which can be outlined in the terms of the original policy. Surrender charges are intended to help the insurer recover some of the costs associated with issuing the policy, particularly if the policyholder decides to terminate it early.

This situation can arise if the original policy has not been in force long enough to have built significant value or if the terms of the account require a penalty for early withdrawal. The amount of the surrender charge may vary based on how long the policy has been held and the specific terms set by the insurance company.

In contrast, other options such as increased cash value, no surrender charges, and higher premiums might not apply in every case. Increased cash value could occur in some situations where a new policy has more favorable growth features, but it is not a guaranteed outcome of replacing a policy. Similarly, no surrender charges would generally not be true since most policies impose these fees when terminated early. Additionally, while premiums can vary between policies, they may not necessarily be higher; this depends on the