State RegulationsTN specificDifficulty 2/5
A Tennessee producer solicits a new life policy that the applicant intends to fund by surrendering a whole life policy he already owns. What must the producer do in this transaction?
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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-.05 governs the duties of producers in life replacement: a producer involved in a sale that will replace existing coverage must give the applicant the required replacement notice and pass along the replacement information so that the replacing and existing insurers can each review the transaction. The producer cannot sidestep the process merely because the applicant agrees to the deal.
Why the other options are wrong
- A) Voluntary signature does not excuse the disclosure; the producer's notice duty exists to make sure the applicant's consent is informed.
- C) The replacement framework requires the producer to bring the insurers into the process, not to keep them out of it.
- D) Coaching the applicant to relabel a surrender as a quiet lapse to dodge the replacement procedures would circumvent the disclosure protections the rule creates.
Memory hook
New policy bought by surrendering the old one? Notice goes to the applicant, information goes to the insurers.