State RegulationsTX specificDifficulty 2/5
A Texas applicant answers no on the replacement statement, but before the policy is issued she tells the agent she has decided to lapse an existing policy to pay for the new one. What must the agent do?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 1114.051-.057, the agent's duty tracks what the agent knows or should know, so when facts change after the application is signed the replacement statement and notice must be updated and the notice and sales material provided to the applicant and submitted to the replacing insurer before the new contract is issued. Practically, a Texas agent should never leave a stale no-replacement answer in the file; correcting the paperwork is what protects both the applicant and the agent's license.
Why the other options are wrong
- A) is wrong because notice to the existing insurer is only part of the duty; the applicant must also receive the replacement notice and the replacing insurer its copies.
- C) is wrong because the original answer is not conclusive; the duty is continuing and depends on the facts as they develop.
- D) is wrong because a new application is not required; the existing paperwork simply has to be corrected and the disclosures delivered.
Memory hook
Facts changed, paperwork changes before issue.