State RegulationsIL specificDifficulty 2/5
An applicant asks her current insurer — the company that issued her whole life policy — to apply a contractual change converting the policy to reduced paid-up insurance. Under Illinois' replacement rule, is this a "replacement"?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
50 Ill. Adm. Code 917 excludes applications to the insurer that issued the existing contract when the transaction is a contractual change or an exercised privilege, such as converting to reduced paid-up status. The rationale is informational: the same insurer already holds the policyowner's complete record, so the risk the rule targets — an owner losing in-force value without understanding the comparison — does not arise in the same way.
Why the other options are wrong
- A) The definition is narrower than that; contractual changes with the issuing insurer are expressly carved out.
- C) Reduced paid-up conversions with the issuing insurer are among the excluded transactions, not among the triggered ones.
- D) Overcorrects in the other direction; surrenders are the classic replacement, but borrowing and other disturbances of the existing policy also qualify.
Memory hook
Same insurer, same file: a contractual change is not a replacement.