State RegulationsIL specificDifficulty 3/5
A producer presents two proposals to a client: one from Company A that would replace the client's Company B policy, and one from Company B itself that would add new coverage without disturbing the existing contract. Under Illinois' replacement rule, which duty applies?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
50 Ill. Adm. Code 917 applies transaction by transaction: the Company A proposal would have the new contract disturb the Company B policy, so the producer must complete the replacement notice, comparison, and documentation procedures. The Company B proposal comes from the insurer that issued the existing policy and leaves that policy undisturbed, falling within the same-insurer exclusion, so no replacement procedures attach to it.
Why the other options are wrong
- A) Blanket treatment ignores the same-insurer exclusion that applies to the Company B option.
- B) The fact that one option escapes the rule does not excuse the other option from full compliance.
- D) New coverage from the issuing insurer without disturbance of the existing contract is not a replacement at all.
Memory hook
Two proposals, two answers: cross-company replaces, same-insurer doesn't.