What Is Replacement Regulation? Definition

Why it matters

Replacing a policy can cost money. A new policy may restart the contestability period, bring higher premiums because of age, and add new surrender charges or fees. The NAIC model regulation, adopted in some form by many states, aims to make sure the consumer compares both policies. Families should not cancel an old policy until the new one is approved and in force. Rules differ by state.

Source: naic.org

Related terms

Policy Replacement: Replacement means ending or changing an existing life insurance policy to buy a new one. State rules require disclosure and comparison so the buyer can make a clear choice.
Suitability: Suitability is the requirement that an insurance recommendation fit the buyer's financial situation, needs, and goals. Many states apply suitability rules, especially to annuity sales.
Contestability Period: The contestability period is the first two years after a policy starts, during which the carrier can review the application and deny a claim for a material misstatement. Many states set this limit.
Free Look Period: A free look period is a set time after you receive a policy when you can cancel it and get a full refund of premiums. Length varies by state, often 10 to 30 days.
Best Interest Standard: The best interest standard is a rule from the NAIC annuity model regulation. It requires agents to act in the consumer's best interest when recommending annuities, and not put their own pay first.

All 241 terms

Why it matters

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