Practice Quiz

Health and Life Insurance

Category - Annuities & Policies

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Policy replacements occur when a new life insurance policy is to be purchased. Which of the following is false about a replacement policy?
  1. The replacement will be reissued with a reduction in cash value
  2. The replacement is amended to produce a reduction in the benefits
  3. The replacement of life insurance is not a legal practice.
  4. The replacement policy is disadvantageous to the consumer.
Explanation
Answer: C - Replacement policies are not illegal. The purpose of a replacement policy is to purchase one life insurance policy to replace another, specifically when the needs of the policy owner have changed. A replacement policy can however, be disadvantageous due to cash value established in the old policy or the interest rates in older policies.
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