State RegulationsNY specificDifficulty 2/5
A New York producer takes an application for new long-term care coverage without asking whether the applicant already owns a policy. The applicant later lets his existing policy lapse in order to pay for the new one. Under Reg 62, the producer:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under Reg 62 (11 NYCRR Part 52), the producer's replacement duties are triggered by what the sale will do to existing coverage, and finding that out is the producer's job at the application stage. Asking about existing long-term care coverage - and disclosing when the sale will cause it to be lapsed, surrendered, or reduced - is part of the solicitation, not an afterthought. The applicant's silence does not excuse the producer from the inquiry.
Why the other options are wrong
- A) The duty to ask about existing coverage rests on the producer; an applicant's silence does not waive a disclosure obligation the producer owes.
- B) Mailing disclosure after the policy is delivered is too late - the replacement obligations are meant to inform the transaction while it is happening.
- C) Insurers have their own replacement responsibilities, but the producer's duties are independent and cannot be delegated away.
Memory hook
Ask about old coverage first; disclose, don't discover later.