A producer in Grand Rapids is taking an application for a new life policy that will replace the applicant's existing coverage. Under Michigan's life insurance replacement rules, which duty must the producer perform?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Michigan Administrative Code R 500.602 requires the producer to obtain a signed applicant statement on whether replacement is involved, present the prescribed Notice to Applicants Regarding Replacement of Life Insurance and the information statement no later than at application time, leave them with the applicant, leave copies of all sales proposals, and submit to the replacing insurer the sales-proposal copy, the information statement, and the names of each existing insurer. Failure to perform these duties is an unfair trade practice under the Michigan Insurance Code.
Why the other options are wrong
- B) The producer has no duty to collect or cancel the applicant's existing policy; the replacing insurer notifies the existing insurer under R 500.603.
- C) The existing insurer's consent is not required; the replacement rules impose duties on the replacing producer and insurer, not a consent requirement on the prior insurer.
- D) Guaranteeing that the new policy is a better value misrepresents material facts in violation of M.C.L. 500.2005 and is never a required duty.
Memory hook
Notice + information statement + leave copies = the replacement trio at application time.