In Florida, the act of life insurance replacement occurs when a new policy is purchased and, as a result of that transaction, an existing policy is surrendered, lapsed, forfeited, assigned to the replacing insurer, otherwise terminated, converted to reduced paid-up insurance, continued as extended term insurance, or reissued with a reduction in cash value. This encompasses actions taken to discontinue coverage under an existing contract to facilitate the purchase of a new one.
Understanding this definition is crucial for consumer protection and regulatory oversight. It ensures transparency in the insurance market by requiring insurers to provide disclosures and comparisons, allowing policyholders to make informed decisions. Historically, regulations surrounding these transactions have evolved to prevent unscrupulous practices, such as churning, where agents might induce policyholders to unnecessarily replace policies solely to generate new commissions.
