State RegulationsTN specificDifficulty 1/5
Under the definitions in Tennessee's life replacement rule, what does 'replacement' mean?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Tenn. Comp. R. & Regs. 0780-1-24-.03 defines replacement broadly: the key is a proposed new life insurance purchase coupled with an existing policy that will, or may, be lapsed, surrendered, exchanged, converted, or reduced. The breadth captures indirect funding routes such as cash-value withdrawals, and the Tennessee Department of Commerce & Insurance applies this definition to decide when the replacement procedures attach.
Why the other options are wrong
- A) An increase in benefits under the same existing policy involves no new purchase displacing old coverage, so it is not a replacement.
- C) Collecting a renewal premium keeps the same policy alive; nothing new is purchased and nothing existing is displaced.
- D) Paying a death claim is the ordinary performance of the contract, not a sales transaction affecting any existing coverage.
Memory hook
New policy in, old policy out — lapse, surrender, exchange, convert, or reduce equals replacement.