State RegulationsNC specificDifficulty 2/5
A policyholder exchanges an existing life policy for a new one issued by the same insurer (an internal replacement). Under North Carolina replacement rules, what must the insurer credit from the replaced policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under 11 NCAC 12 .0612(b), where the replacing insurer and the existing insurer are the same or affiliates, the insurer must credit the time already elapsed under the replaced policy's incontestability and suicide periods. Without this rule, an internal exchange could reset contestability and suicide limitations and strip protections the insured had already earned on the original contract.
Why the other options are wrong
- A) The whole point of the same-insurer rule is to prevent resetting; elapsed time carries over rather than starting over.
- C) Both the incontestability period and the suicide period carry over; limiting the credit to suicide only misreads the rule.
- D) Premium credit is not required; the rule addresses the contestability and suicide clocks, not premium accounting.
Memory hook
Same insurer, no reset: old clocks keep ticking on the new policy.