State RegulationsMI specificDifficulty 2/5
A replacing insurer receives an application marked as a replacement. Under R 500.603 and DIFS Bulletin 84-06, what is the replacing insurer's obligation regarding the existing insurer?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
R 500.603, reinforced by DIFS Bulletin 84-06, requires the replacing insurer to notify each existing insurer of the contemplated replacement and to furnish the sales proposal. This gives the existing insurer a fair opportunity to respond, including through conservation efforts, and ensures transparency across companies whenever a Michigan policyholder's existing life coverage is being replaced.
Why the other options are wrong
- A) The existing insurer's approval is not required; the obligation is notice plus the sales proposal, not consent.
- B) The initial premium belongs to the new contract with the replacing insurer and is not forwarded to the existing insurer.
- C) The replacing insurer itself carries the notification duty under R 500.603; it cannot be discharged solely by the agent's communications.
Memory hook
The new insurer rings the old insurer: notice plus the sales proposal.