State RegulationsTN specificDifficulty 3/5
Which of the following transactions falls outside the definition of replacement under Tennessee's life replacement rule?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Tenn. Comp. R. & Regs. 0780-1-24-.03 keys replacement to the purchase of new life insurance that displaces existing coverage. Reinstating a lapsed policy with the same insurer creates no new contract and leaves no displaced coverage, so it is not a replacement; the other choices each pair a new purchase with a lapsed, reduced, or converted existing policy, which is exactly the rule's definition.
Why the other options are wrong
- B) A new purchase that causes the existing policy to lapse for nonpayment is a classic replacement under the definition.
- C) Funding a new purchase with cash-value withdrawals that reduce the existing policy is expressly within the broad replacement definition.
- D) A new purchase that converts the existing policy to reduced paid-up status displaces existing coverage and therefore qualifies as a replacement.
Memory hook
No new contract, no replacement — a plain reinstatement stays outside the rule.