State RegulationsMI specificDifficulty 2/5
A policyowner in Lansing wants to exchange her existing life policy for a new policy issued by the same insurer. How do Michigan's replacement rules treat this transaction?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under Michigan's replacement framework (Michigan Administrative Code R 500.603 and the DIFS Bulletin 84-06 context), transactions with the same insurer or an affiliate of the existing insurer are exempt from the replacement rules. The rules target external replacement, where coverage moves from one insurer to another and the risk of churning and misinformation is greatest. An internal exchange by the same carrier does not require the notice, information statement, and filing duties imposed on external replacements.
Why the other options are wrong
- A) The exemption turns on the identity of the insurer issuing the new policy, not on which company the producer represents.
- B) DIFS approval is not a condition; the exemption applies automatically to same-insurer or affiliate transactions.
- D) An internal exchange is exempt regardless of any change in cash value; the same-insurer/affiliate exemption is not limited to transactions that reduce value.
Memory hook
Same insurer or affiliate = internal move = exempt.