State RegulationsIL specificDifficulty 2/5
Which of these Illinois transactions falls outside the disclosure requirements of the replacement regulation?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
50 Ill. Adm. Code 917 exempts transactions with the insurer that issued the existing policy. When the applicant simply applies to the same company for new coverage without disturbing the existing contract, the churn scenario the rule polices — a switch to another carrier that erodes in-force value — never occurs, so the full replacement notice and comparison machinery is not triggered.
Why the other options are wrong
- A) A cross-company purchase causing the current policy to lapse is the paradigm replacement subject to the rule.
- C) Funding a new policy by borrowing against another company's policy's cash value is a replacement under the definition.
- D) Causing surrender of the existing policy for cash value is the classic replacement transaction.
Memory hook
Stay with your own insurer and the replacement paperwork stays home.