19.3.4 Notice of Replacement

The Florida Replacement Rule sets forth the demands and also actions to be followed by insurance service providers and insurance producers when a proposal is being made to a client that plans to replace existing life insurance contract(s) with the proposed new life insurance policy.

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Helpful Hint

Any replacement plans should be beneficial to the client; otherwise, illegal activities such as churning might happen.

The replacement of existing life insurance policies via brand-new contracts of life insurance requires a written comparikid and also summary statement at the policyholder"s repursuit.

The Florida manual defines "Replacement" in this conmessage as a transactivity in which brand-new life insurance is to be purchased and also it is recognized or have to be recognized to the proposing agent or to the proposing insurance company if there is no agent that by factor of such transaction existing life insurance has been or is to be:

lapsed, forfeited, surrendered or otherwise terminated;converted to diminished paid-up insurance, ongoing as extended term insurance, or otherwise reduced in worth by the usage of nonforfeiture benefits or other plan values;amended so regarding effect either a reduction in benefits or in term for which coverage would otherwise remajor in force or for which benefits would be paid;reissued through any type of reduction in cash value; orpledged as collateral or topic to borrowing, whether in a solitary loan or under a schedule of borrowing over a duration of time for quantities in the accumulation exceeding 25% of the loan worth collection forth in the policy.Churning

Churning is defined as the exercise through which plan worths in an existing life insurance policy or annuity contract are used to purchase an additional policy or contract with that very same insurer for the function of earning added premiums or commissions under any type of of the following conditions:

without an objectively reasonable basis for believing that the brand-new plan will cause an actual and also demonstrable benefit;in a deceptive or misleading manner;without indeveloping the applicant that the policy worth of the existing plan will certainly be supplied to purchase the brand-new policy; orwithout indeveloping the applicant that the new policy will not be a paid-up policy or that extra premiums will be due.Twisting

Twisting is the exercise of inducing a policyowner via one company to lapse, forfeit or surrender a life insurance plan for the function of taking out a plan in another company.

Twisting is in violation of the Code of Ethics of the Florida Association of insurance and Financial Advisors and also Florida law. The exercise of "stripping" plans of their cash worth to make "other investments" drops in the category of twisting.


Make sure you have a full understanding of what churning is and also the distinction between churning and twisting.


An agent that exhibits fraudulent conduct in committing the techniques of twisting or churning deserve to be charged through a very first degree misdemeanor if he/she display screens fraudulent conduct and also might be topic to a $5,000 fine for each non-willful violation or $75,000 for each willful violation.

Free Look

Florida regulation requires agents to ask eincredibly person solicited for insurance whether they are currently covered under any type of various other contracts. This permits the agent to define the extent to which the proposed coverage will certainly overlap or duplicate coverage. Before an application is taken, agents are forced to obtain a signed develop from the applicant acknowledging that this indevelopment has actually been provided.

The agent must give the applicant a buyer"s guide and policy summary and also discshed the totally free look alarea. If after the cost-free look period ends and the applicant decides not to purchase the plan, he or she is entitbrought about a full refund of any premium amount collected by the insurer.

Buyer"s Guide and also Policy Summary

Florida law needs insurance suppliers to deliver a Buyer"s Guide, which helps consumers shop and compare policies. Buyer"s guides are written in layman"s language for the average consumer"s understanding. A Policy Rundown is additionally required, which addresses the specific product being presented for sale. These papers are normally delivered prior to the agent accepts the applicant"s initial premium.

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With respect to annuities, the insurer have to carry out to each prospective purchaser a Buyer"s Guide to Annuities and also a Contract Rundown as offered in the NAIC Model Annuity and also Deposit Fund Regulation and also the plan have to administer a 14-day totally free look period.


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