What is defined as exchanging an existing policy for a new policy in life insurance and annuity replacements?

The process of exchanging an existing policy for a new policy in life insurance and annuities is referred to as "replacement." This term specifically relates to the practice of replacing one insurance policy with another, which can involve the policyholder surrendering an old policy in order to purchase a new one. Replacement can sometimes lead to risks, such as losing accumulated benefits on the old policy or encountering new restrictions or waiting periods on the new policy.

Understanding this definition is important for life insurance agents as they must adhere to regulatory guidelines and ensure that replacements are in the best interest of the policyholders. The concept of replacement emphasizes the necessity for agents to provide full disclosure about the advantages and disadvantages involved in such transactions.