Primerica Life Producer Exam Practice Test 2026 – Complete Prep Resource

The replacement rule applies in this scenario because it specifically addresses situations where an existing insurance policy is being replaced with a new one. When an agent is aware that an applicant intends to cash in an old policy to fund the purchase of new insurance, the replacement rule mandates that certain procedures and disclosures must be followed to ensure that the applicant is fully informed of the implications of replacing their policy. This includes providing comparisons of the benefits, costs, coverage, and any potential risks of discontinuing the existing policy. The intention behind this rule is to protect consumers from losing essential benefits and to ensure they make informed decisions.

Other options pertain to different aspects of insurance processes. The disclosure rule generally involves informing customers about specific details related to the product but does not specifically address the replacement of one policy with another. The underwriting rule focuses on the assessment of risk and the process of determining eligibility for coverage, while the policy lapse rule pertains to instances where a policyholder fails to make premium payments, leading to the termination of the policy. Each of these rules serves a different function within the insurance process.