ISI chief executive Vance Arkinstall says sadly there are cases where existing policies have been replaced and several years down the track when a claim arises it is found that the new policy doesn't provide the cover expected.

"In a number of these cases if the original policy had continued the claim would have been settled without question."

He says for example changes in health, leisure activities or occupation may affect your insurability with a new provider. A different policy may offer a lower premium but may not provide the same coverage. The new policy may have new benefits but might also not cover some risks the existing policy covered.

"When considering a replacement it is essential that professional advice is obtained before making a decision," he says.

The new guidelines aim to provide increased transparency and disclosure so that life insurance policy owners who are considering replacing an existing policy with a new policy make an informed decision for the right reasons.

The new guidelines include a brochure to assist consumers to understand the advantages and the risks associated with replacements and to assist consumers in understanding the questions they should ask their adviser.

There is also Replacement Policy - Customer Protection advice designed to assist the customer to understand the information they need to consider before making an informed decision.