19.3.4 Notice of Replacement

The Florida Replacement Rule sets forth the demands and actions to be complied with by insurance carriers and also insurance producers as soon as a proposal is being made to a customer who plans to replace existing life insurance contract(s) via the proposed new life insurance plan.

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Helpful Hint

Any replacement policies must be useful to the client; otherwise, illegal activities such as churning might occur.

The replacement of existing life insurance policies with brand-new contracts of life insurance calls for a created compariboy and also summary statement at the policyholder"s research.

The Florida hand-operated defines "Replacement" in this conmessage as a transactivity in which brand-new life insurance is to be purchased and it is known or should be known to the proposing agent or to the proposing insurance company if tright here is no agent that by reason of such transactivity existing life insurance has actually been or is to be:

lapsed, forfeited, surrendered or otherwise terminated;converted to reduced paid-up insurance, ongoing as extended term insurance, or otherwise decreased in value by the use of nonforfeiture benefits or various other plan values;amended so as to result either a reduction in benefits or in term for which coverage would certainly otherwise reprimary in force or for which benefits would be paid;reissued via any type of reduction in cash value; orpledged as collateral or subject to borrowing, whether in a single loan or under a schedule of borrowing over a period of time for amounts in the accumulation exceeding 25% of the loan worth collection forth in the policy.Churning

Churning is identified as the exercise by which policy values in an existing life insurance policy or annuity contract are used to purchase another policy or contract with that same insurer for the objective of earning additional premiums or comobjectives under any type of of the following conditions:

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

Twisting is the exercise of inducing a policyowner through one firm to lapse, forfeit or surrender a life insurance plan for the purpose of taking out a policy in an additional company.

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


Make certain you have actually a complete understanding of what churning is and the difference in between churning and also twisting.


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

Free Look

Florida legislation needs agents to ask eextremely person solicited for insurance whether they are currently covered under any kind of various other contracts. This enables the agent to explain the extent to which the proposed coverage will certainly overlap or duplicate coverage. Before an application is taken, agents are compelled to obtain a signed form from the applicant acknowledging that this information has been offered.

The agent must offer the applicant a buyer"s guide and plan summary and also disclose the cost-free look allocation. If after the cost-free look duration ends and also the applicant decides not to purchase the plan, he or she is entitled to a full refund of any type of premium amount collected by the insurer.

Buyer"s Guide and Policy Summary

Florida regulation requires insurance companies to provide a Buyer"s Guide, which helps consumers shop and also compare policies. Buyer"s guides are created in layman"s language for the average consumer"s expertise. A Policy Rundown is likewise required, which addresses the certain product being presented for sale. These documents are generally ceded before the agent accepts the applicant"s initial premium.

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With respect to annuities, the insurer must provide to each prospective purchaser a Buyer"s Guide to Annuities and a Contract Outline as provided in the NAIC Model Annuity and Deposit Fund Regulation and the plan must administer a 14-day totally free look period.


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