California Life-Only & Accident and Health AgentCalifornia Law - GeneralMedium
A life insurance agent is involved in an exchange of an existing life insurance policy for a new one with the same insurer. This specific transaction is known as a(n):
- AReplacement
- BInternal Exchange
- CTwisting
- DReinstatement
Show answer & explanationAnswer & explanation
Correct answer: B. Internal Exchange
An 'internal exchange' refers specifically to the transaction where an existing life insurance policy is exchanged for a new one issued by the *same* insurer. This is distinct from a 'replacement,' which involves a new policy from a *different* insurer.
Why the other options are wrong
- A. Replacement involves a new policy from a *different* insurer.
- C. Twisting is an illegal act of inducing a policyholder to lapse or surrender an existing policy for a new one to the insured's detriment.
- D. Reinstatement is restoring a lapsed policy to full force and effect.
Internal Exchange
The transaction where a life insurance policyholder exchanges an existing policy for a new one issued by the same insurance company.
- Involves the same insurer.
- Different from 'replacement' which involves a new insurer.
- Subject to specific disclosure requirements to ensure suitability.
Memory trick: Change Your Policy: Same Company, It's an Internal Exchange.