Which term describes a practice of terminating an existing policy or letting it lapse, and obtaining a new one?

Which term describes a practice of terminating an existing policy or letting it lapse, and obtaining a new one?

• A. Fixed life insurance
• B. Replacement
• C. Illustration
• D. Group life insurance

Answer: (B)

Replacement describes terminating an existing policy or letting it lapse and purchasing a new one. This term fits because the emphasis is on switching coverage from what you already have to a new contract, rather than simply buying a new policy upfront or discussing a specific product type. When replacement occurs, there are important implications to consider, such as whether the old policy’s guarantees are preserved, any new underwriting or medical exams, and how cash value or existing riders are affected. The other terms refer to different concepts: fixed life insurance is a type of policy with fixed terms and premiums, an illustration is a formal projection of potential policy performance, and group life insurance is coverage provided through an employer or association, not the act of replacing existing coverage.

Replacement describes terminating an existing policy or letting it lapse and purchasing a new one. This term fits because the emphasis is on switching coverage from what you already have to a new contract, rather than simply buying a new policy upfront or discussing a specific product type. When replacement occurs, there are important implications to consider, such as whether the old policy’s guarantees are preserved, any new underwriting or medical exams, and how cash value or existing riders are affected. The other terms refer to different concepts: fixed life insurance is a type of policy with fixed terms and premiums, an illustration is a formal projection of potential policy performance, and group life insurance is coverage provided through an employer or association, not the act of replacing existing coverage.