CARD Q020
Which comparison is most important before recommending replacement of a cash-value policy?
- Whether the new first-year premium is lower, without comparing later costs
- Whether the illustrated values exceed the existing guaranteed values
- Whether the new death benefit is larger, without considering funding
- Existing guarantees, new costs, surrender charges, and restarted limitations
Existing guarantees, new costs, surrender charges, and restarted limitations
Replacement can change guarantees, create charges, and restart contestability or suicide periods. Follow the applicable replacement disclosure process.
Why each choice is right or wrong
A. Whether the new first-year premium is lower, without comparing later costs
Incorrect. A first-year premium comparison alone ignores long-term costs and guarantees.
B. Whether the illustrated values exceed the existing guaranteed values
Incorrect. Nonguaranteed illustrations should not be treated as equivalent to guaranteed values.
C. Whether the new death benefit is larger, without considering funding
Incorrect. A larger benefit can still be poorly funded or costly.
D. Existing guarantees, new costs, surrender charges, and restarted limitations
Correct. Replacement can change guarantees, create charges, and restart contestability or suicide periods. Follow the applicable replacement disclosure process.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.
Sources & further reading
- Illinois DOI: Replacing life insurance policies
- North Carolina DOI: Standard life provisions and options
- Ohio: Required life-policy provisions (state example)
- California DOI: Life policy course outline and state requirements
- Texas DOI: Life insurance guide
- IRS Publication 525: Taxable and nontaxable income