State RegulationsTN specificDifficulty 3/5
A Tennessee applicant asks her existing insurer to exercise the conversion privilege contained in her current term policy, exchanging it for the same insurer's permanent policy as the contract allows. Under Tenn. Comp. R. & Regs. 0780-1-24, is this a replacement?
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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 confines replacement to transactions in which new coverage displaces an existing policy in favor of a different contract; exercising a contractual change or conversion privilege with the existing insurer, as the policy itself provides, falls outside that definition. The Tennessee Department of Commerce & Insurance treats these internal transactions differently because no other carrier's policy is being displaced by outside solicitation.
Why the other options are wrong
- A) A policy ending and another beginning is not enough; the rule turns on whether an existing policy is displaced outside the contract's own privileges.
- C) There is no free-look waiver element in the replacement definition, and the transaction is not replacement regardless of any waiver.
- D) Term policies can certainly be replaced; the exclusion rests on the contractual privilege, not on the product type.
Memory hook
Same insurer, contract's own conversion privilege — internal, not replacement.