1. 11783 POINTS
    Larry GilmorePRO
    Agent Owner, Gilmore Insurance Services, Marysville, Washington State
    What is the replacement rule in life insurance?   Well, I don't know if there's a rule, but there are laws that require separate documentation where the agent answers questions about the replacement and the impact it will have on the policy holder. These documents are where the insurace agent states why the replacement may be a good idea.
    Answered on May 20, 2013
  2. 0 POINTS
    David RacichPRO
    Fountain Hills, Arizona
    Every life insurance company requires notification of the replacement a life insurance policy. If the policy has cash values or the replacing agent wants to transfer the basis of the policy to the new policy, a 1035 exchange form will also be required. The rules of engagement are stringent. Borrowing cash values to fund a new policy could be construed as replacement. Lowering the death benefit of an existing policy while keeping the policy in force, may be interpreted as replacement if new coverage is added to a new policy. The department of insurance in most states will respond to company complaints of agents not following the rules.
    Answered on May 20, 2013
  3. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    There is no one replacement rule in life insurance, but there are some replacement guidelines and explanations. Here are a few:

    1) If you replace a policy, you should understand what you are giving up in your old policy and/or gaining in your new policy. 
    2) Whether or not you make the replacement is up to you to do. The insurance company for your new policy does not have the authority to terminate your old policy. The only time it might do so is if the new policy is with the same company as your old policy was, and you had explicitly stated that you wanted to replace your old policy with the new one.
    3) If you are keeping your old policy, you must be financially qualified to have the total amount of life insurance that you have now AND are applying for.
    4) In New York the replacement paperwork must be processed before the new life insurance application can be taken.
    Answered on November 4, 2013
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