California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthMedium
A policyowner wishes to replace their existing life insurance policy with a new one. Under California regulations, which of the following is a primary responsibility of the replacing insurer?
- ATo advise the applicant to lapse the existing policy immediately upon application for the new policy.
- BTo notify the existing insurer of the proposed replacement within 3 business days of receiving the application.
- CTo waive all underwriting requirements for the new policy to facilitate the replacement.
- DTo provide the applicant with a comparative information form outlining the differences between the policies.
Show answer & explanationAnswer & explanation
Correct answer: B. To notify the existing insurer of the proposed replacement within 3 business days of receiving the application.
California regulations require the replacing insurer to notify the existing insurer of the proposed replacement. This notification must occur within 3 business days of receiving the completed application and a copy of the replacement notice.
Why the other options are wrong
- A. Advising immediate lapse is unethical and detrimental to the client, as they could be uninsured.
- C. Waiving underwriting is not a standard practice for replacement and could expose the insurer to undue risk.
- D. While important, providing a comparative form is primarily the responsibility of the agent/producer, though the insurer facilitates it.
Life Insurance Replacement (CA)
When replacing an existing life insurance policy in California, the replacing insurer must notify the existing insurer within 3 business days of application receipt.
- Protects consumers from detrimental replacements.
- Involves detailed disclosure requirements for agents and insurers.
- Existing insurer can provide information to policyowner.
Memory trick: Replacement is a cycle of notifications and timing.