State RegulationsTX specificDifficulty 1/5
Under the Texas replacement definitions, whether a transaction is a replacement depends primarily on which of the following?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under TIC 1114.002, the test is whether it is known or should be known to the proposing agent, producer or insurer that, by reason of the transaction, existing life insurance or an existing annuity contract has been or will be lapsed, surrendered, assigned to the replacing insurer, converted to reduced paid-up or extended term, reduced in value, or used in a financed purchase. Practically, a Texas agent cannot escape the duties by claiming ignorance of facts that a reasonable agent would have discovered by reviewing the existing policies.
Why the other options are wrong
- A) is wrong because an internal replacement by the same insurer can still be a replacement if existing coverage is reduced or terminated.
- B) is wrong because the applicant's label does not control; the standard is what the agent or insurer knows or should know.
- D) is wrong because the existing insurer's consent is not an element of the definition.
Memory hook
Known or should have known beats what the applicant calls it.