Pennsylvania Life Insurance Practice Exam

Replacing an existing life policy with a new one is the transaction described. When you buy a new policy and surrender the old one, you’re effectively replacing the coverage, not just renewing, converting, or substituting within the same policy framework. This triggers replacement considerations, such as potential loss of benefits, surrender charges, and the need for disclosures and a suitability review.

Renewal would mean simply continuing the current policy by paying premiums, with no new contract or surrender of the old policy. Conversion involves changing a policy from one form to another (often term to permanent) within the same insurer, without surrendering the old policy. Substitution is sometimes used to describe replacing coverage, especially with a new policy from a different insurer, but the standard term in this context is replacement.