What Is the Difference Between Insurance Twisting & Insurance Churning?

Life insurance twisting or churning is an unethical practice used by some insurance agents.

Some life insurance agents may engage in unethical practices to earn high commissions. One common practice is twisting, which is the same thing as churning, and involves replacing an existing policy with another.

Definition

Twisting or churning is the process of using the cash value of one policy to purchase another policy with a larger benefit. Life insurance agents earn commissions on the purchase of the new policy and the policyholder may see little or no increase in her premium.

Effects

While the policyholder may acquire a policy with a larger death benefit, churning often uses up the cash value that has built up in the original policy over the years. In some instances, the policyholder could be starting over regarding the accumulation of cash.

Considerations

Be wary whenever a life insurance agent tries to get you to switch from one cash value policy to another. If you need morel insurance, you may be better off purchasing an additional policy instead of replacing an existing one.

References

• Insure.com: Anatomy of a Misleading Life Insurance Sales Pitch