West Virginia State Life Insurance Practice Exam

Which of these actions does NOT constitute life insurance policy replacement?

1. Discontinue premiums on an existing policy and apply the payments to a new policy

2. Surrender an existing policy for cash value

3. Replace an existing policy with a new one

4. Take a loan against an existing policy and purchase a new one

The correct answer is: Discontinue premiums on an existing policy and apply the payments to a new policy

Discontinuing premiums on an existing policy and applying the payments to a new policy does not constitute life insurance policy replacement. Replacement generally involves one policy being replaced by another, which often includes some form of transaction that effectively terminates the first policy in favor of the new one. When premiums on an existing policy are simply stopped, and those funds are shifted to a new policy without formally surrendering the existing one, the original policy remains in force until the insurer officially terminates it, meaning there is no direct replacement event occurring. Option B describes a surrender of an existing policy, option C involves replacing one existing policy with another directly, and option D implies using an existing policy as collateral for a loan to fund a new policy, all of which are actions that create a replacement scenario. Thus, option A represents an approach that does not constitute an official replacement of the policy.