Under TIC 1114.001, which of the following best states the purpose of the Texas life insurance replacement rules?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
TIC 1114.001 states that the purpose of the chapter is to regulate the activities of insurers and agents with respect to the replacement of existing life insurance policies and annuity contracts in order to protect the interests of the public: by assuring that the policyowner receives information with which a decision can be made in the policyowner's own best interest, by reducing the opportunity for misrepresentation and incomplete disclosure, and by establishing penalties for failure to comply. The chapter regulates how a replacement is presented and documented; it does not forbid replacement itself, so a properly disclosed replacement that serves the policyowner is entirely lawful. Practically, an agent who treats the chapter as a ban and simply refuses to handle replacements, or who skips the paperwork, defeats the disclosure function the statute was written to create.
Why the other options are wrong
- A) The chapter regulates and requires disclosure of replacements; it does not prohibit them, and a policy with cash value may lawfully be replaced after the required disclosures are made.
- B) TIC 1114.001 contains no commission-approval function; its focus is information for the policyowner and sanctions for noncompliance.
- D) The statute compels disclosure, not a guarantee of better benefits or lower premiums; TDI does not certify that the proposed policy is superior to the one being replaced.
Memory hook
Replacement rules inform the buyer; they do not ban the sale.