West Virginia State Life Insurance Practice Exam

What document must be signed by both the producer and applicant when reducing cash value of an existing life insurance policy?

1. Application form

2. Notice regarding replacement

3. Disclosure statement

4. Supplementary application

The correct answer is: Notice regarding replacement

When reducing the cash value of an existing life insurance policy, the important document that must be signed by both the producer and the applicant is the notice regarding replacement. This document serves a critical purpose; it ensures that the applicant is fully informed about the implications of reducing the cash value, which might involve replacing one policy with another. The notice is designed to protect consumers by making them aware of potential disadvantages or risks associated with policy replacement or modifications. It highlights the significance of understanding how the changes might affect the policy's benefits, coverage, and cash value over time. By requiring both the producer and the applicant to sign this document, it establishes a mutual acknowledgment of the decision to alter the existing policy's cash value, emphasizing the importance of transparency in such transactions. While other documents like the application form, disclosure statement, or supplementary application might be involved in various insurance processes, the specific requirement for a signed notice regarding replacement directly addresses the context of modifying cash value in existing life insurance, making it the correct answer.