COMAR 31.09.05 · Chapter 05 Replacement of Life Insurance and Annuities

Administrative History Effective date: May 1, 1962 Amended effective August 1, 1967; March 1, 1968; May 1, 1968 Chapter revised effective January 1, 1980 (6:15 Md. R. 1278) Chapter revised effective April 1, 1985 (12:3 Md. R. 244) Chapter recodified from COMAR 09.30.31 to COMAR 31.09.05 effective September 7, 1998 (25:18 Md. R. 1439) —————— Regulations .01 — .12 repealed and new Regulations .01 — .12 adopted effective January 1, 2002 (28:15 Md. R. 1401) Regulation .02B amended effective March 10, 2008 (35:5 Md. R. 642) Regulation .03B amended effective October 14, 2002 (29:20 Md. R. 1594) Regulation .06A amended effective October 14, 2002 (29:20 Md. R. 1594); October 8, 2018 (45:20 Md. R. 921) Regulation .07C amended effective October 14, 2002 (29:20 Md. R. 1594) Regulation .09B amended effective October 14, 2002 (29:20 Md. R. 1594) Authority Insurance Article, §§ 2-109 and 27-213 , Annotated Code of Maryland

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.01 Purpose. The purpose of this chapter is to: A. Regulate the activities of insurers and insurance producers with respect to the replacement of existing life insurance and annuities; and B. Protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions by: (1) Ensuring that purchasers receive information to make a decision in the purchasers' own best interests; (2) Reducing the opportunity for misrepresentation and incomplete disclosure; and (3) Establishing penalties for failure to comply with the requirements of this chapter.

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.02 Scope. A. "Direct Solicitation" Defined. In this regulation, the term "direct solicitation" does not include any group meeting: (1) Held by an insurance producer solely for the purpose of educating individuals about or enrolling individuals in a plan or arrangement; or Initiated by an individual employee or group member, assisting with the selection of investment options offered by a single insurer in connection with enrolling that individual employee or group member. B. Exempted Transactions. Unless specifically included, this chapter does not apply to transactions involving the following: (1) Credit life insurance; (2) Group life insurance or group annuities if there is no direct solicitation of individuals by an insurance producer; (3) An application to an insurer that issued an existing life insurance policy or existing annuity contract if: (a) A contractual change or a conversion privilege is being exercised; (b) The existing life insurance policy or existing annuity contract is being replaced by the same insurer under a program filed with and approved by the Commissioner; or (c) A term conversion privilege is exercised among corporate affiliates; (4) Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same insurer; (5) Except as provided in §C of this regulation , life insurance policies or annuity contracts used to fund: (a) An employee pension or welfare benefit plan that is covered by ERISA; (b) A plan described by 26 U.S.C. §401(a), 401(k), or 403(b), if the plan, for purposes of ERISA, is established or maintained by an employer; (c) A governmental or church plan defined in 26 U.S.C. §414, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under 26 U.S.C. §457 of the Internal Revenue Code; (d) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor; or (e) Any other benefit plan qualifying for income tax deductibility of premiums under Title 26 of the United States Code (Internal Revenue Code); (6) New coverage provided under a life insurance policy or annuity contract if the cost is borne wholly by the insured's employer or by an association of which the insured is a member; (7) Existing life insurance that is a nonconvertible term life insurance policy that will expire in 5 years or less and cannot be renewed; (8) Immediate annuities that are purchased with proceeds from an existing annuity contract; or (9) Structured settlements. C. Plan or Arrangement Funded Solely by Elective Employee Contributions. Notwithstanding §B(5) of this regulation , this chapter applies to a life insurance policy or annuity contract used to fund a plan or arrangement funded solely by contributions an employee elects to make, whether on a pretax or aftertax basis, if: (1) The insurer has been notified that plan participants may choose from among two or more insurers; and (2) There is a direct solicitation of an individual employee by an insurance producer for the purchase of an annuity contract or life insurance policy. D. Section B(8) of this regulation does not exclude from this chapter an immediate annuity purchased with proceeds from an existing life insurance policy.

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.03 Definitions. A. In this chapter, the following terms have the meanings indicated. B. Terms Defined. (1) "Direct-response solicitation" means a solicitation made: (a) Through a sponsoring or endorsing entity; or (b) Individually solely by mail, telephone, internet, or other mass communication medium. (2) "ERISA" means the federal Employee Retirement Income and Security Act of 1974. (3) Existing Annuity Contract. (a) "Existing annuity contract" means an annuity contract that is in force. (b) "Existing annuity contract" includes an annuity contract that is within an unconditional refund period. (4) "Existing insurer" means an insurer whose life insurance policy or annuity contract is or will be changed or affected in a manner described in §B(11) of this regulation . (5) Existing Life Insurance Policy. (a) "Existing life insurance policy" means an individual life insurance policy that is in force. (b) "Existing life insurance policy" includes a life insurance policy that is: (i) Under a binding or conditional receipt; (ii) Within a conditional refund period; or (iii) On a paid-up or extended-term basis. (6) "Financed purchase" means the purchase of a new life insurance policy involving the actual or intended use of funds obtained by the withdrawal, surrender, or borrowing from values of an existing life insurance policy contract to pay all or part of a premium due on the new life insurance policy. (7) "Illustration" means a presentation or depiction that includes nonguaranteed elements of a life insurance policy over a period of years as defined in COMAR 31.09.09 . (8) "Insurance producer" has the meaning stated in Insurance Article, §1-101(u), Annotated Code of Maryland . (9) "Policy summary" means: (a) For life insurance policies or annuity contracts other than universal life insurance policies, a written statement regarding a life insurance policy or annuity contract that contains, to the extent applicable, the following information: (i) Current death benefit; (ii) Annual life insurance policy or annuity contract premium; (iii) Current cash surrender value; (iv) Current dividend; (v) Application of current dividend; and (vi) Amount of outstanding loan; or (b) For universal life insurance policies, a written statement that contains at least the: (i) Beginning and end date of the current report period; (ii) Life insurance policy value at the end of the previous report period and at the end of the current report period; (iii) Total amounts that have been credited or debited to the life insurance policy value during the current report period, identifying each by type, for example, interest, mortality, expense, and riders; (iv) Current death benefit at the end of the current report period on each life covered by the life insurance policy; (v) Net cash surrender value of the life insurance policy as of the end of the current report period; and (vi) Amount of outstanding loans, if any, as of the end of the current report period. (10) "Registered contract" means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of Title 15, Chapter 2A, Subchapter I of the United States Code (Securities Act of 1933). (11) "Replacement" means a transaction in which a new life insurance policy or annuity contract is to be purchased, and it is known or should be known to the proposing insurance producer, or to the proposing insurer if there is no insurance producer, that by reason of the transaction, an existing life insurance policy or existing annuity contract has been or is to be: (a) Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated; (b) Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other life insurance policy or annuity contract values; (c) Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid; (d) Reissued with any reduction in cash value; or (e) Used in a financed purchase. (12) "Replacing insurer" means an insurer that issues or proposes to issue a new life insurance policy or annuity contract: (a) To replace an existing life insurance policy or existing annuity contract; or (b) Through a financed purchase. (13) "Sales material" means a sales illustration or any other written, printed, or electronically presented information that is: (a) Created, completed, or provided by the insurer or insurance producer; and (b) Used in the presentation to the owner of a life insurance policy or annuity contract related to the life insurance policy or annuity contract purchased.

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.04 Duties of Insurance Producer. A. Signed Statement. An insurance producer who initiates an application for a life insurance policy or annuity contract shall submit to the insurer, with or as part of the application, a statement signed by both the applicant and the insurance producer as to whether the applicant has any existing life insurance policy or existing annuity contract. B. Applicant Without Existing Life Insurance Policy or Existing Annuity Contract. If the applicant does not have an existing life insurance policy or existing annuity contract, the insurance producer's duties with respect to replacement are complete upon the fulfillment of the requirement in §A of this regulation . C. Applicant With Existing Life Insurance Policy or Existing Annuity Contract. (1) If the applicant has an existing life insurance policy or existing annuity contract, the insurance producer shall present and, unless declined, read to the applicant, not later than at the time of taking the application, a notice regarding replacement in the form contained in Regulation .10 of this chapter or other substantially similar notice approved by the Commissioner. (2) Notwithstanding §C(1) of this regulation , approval is not required if amendments to the notice are limited to the omission of references not applicable to the product being sold or replaced. (3) The notice shall be signed by both the applicant and the insurance producer attesting that the notice has been: (a) Read aloud by the insurance producer or that the applicant did not wish the notice to be read aloud; and (b) Left with the applicant. D. Contents of Notice. (1) The notice shall include a: (a) List of each life insurance policy or annuity contract proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and life insurance policy or annuity contract number if available; and (b) Statement as to whether each life insurance policy or annuity contract will be replaced or whether a life insurance policy will be used as a source of financing for the new life insurance policy or annuity contract. (2) If a life insurance policy or annuity contract number has not been issued by the existing insurer, alternative identification, such as an application or receipt number, shall be listed. E. Sales Material. (1) In connection with a replacement transaction, the insurance producer shall leave the original or a copy of all sales material with the applicant at the time an application for a new life insurance policy or annuity contract is completed. (2) With respect to electronically presented sales material, the insurance producer shall provide to the owner of a life insurance policy or annuity contract the original or a copy of all sales material in printed form not later than the time of delivery of the life insurance policy or annuity contract. F. Provision of Information to the Insurer. Except as provided in Regulation .06D of this chapter , in connection with a replacement transaction, the insurance producer shall submit to the insurer to which an application for a life insurance policy or annuity contract is presented: (1) A copy of each document required by this regulation; (2) A statement identifying any preprinted or electronically presented insurer-approved sales materials used; and (3) Copies of individualized sales materials, including illustrations related to the specific life insurance policy or annuity contract purchased.

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.05 Duties of Insurers that Use Insurance Producers. A. System of Supervision and Control. (1) An insurer shall maintain a system of supervision and control to ensure compliance with the requirements of this chapter that includes, at a minimum, procedures to: (a) Inform its insurance producers of the requirements of this regulation and incorporate the requirements of this regulation into all relevant insurance-producer training manuals prepared by the insurer; (b) Provide to each insurance producer a written statement of the insurer's position with respect to the acceptability of replacements that provides guidance to its insurance producer as to the appropriateness of these transactions; (c) Review the appropriateness of each replacement transaction that the insurance producer does not indicate is in accord with §A(1)(b) of this regulation ; (d) Confirm that the requirements of this regulation have been met; and (e) Detect transactions that are replacements of existing life insurance policies or existing annuity contracts by the existing insurer, but that have not been reported as replacements by the applicant or insurance producer. (2) Compliance with this section may include systematic customer surveys, interviews, confirmation letters, and programs of internal monitoring. B. Capacity to Monitor Replacements. (1) An insurer shall: (a) Have the capacity to monitor each insurance producer's life insurance policy and annuity contract replacements for that insurer; and (b) On request, make all records regarding replacements available for inspection by the Commissioner. (2) The capacity to monitor shall include the ability to produce records for each insurance producer's: (a) Life insurance replacements, including financed purchases, as a percentage of the insurance producer's total annual sales for life insurance; (b) Number of lapses of life insurance policies as a percentage of the insurance producer's total annual sales for life insurance; (c) Annuity contract replacements as a percentage of the insurance producer's total annual annuity contract sales; (d) Number of transactions that are unreported replacements of existing life insurance policies or existing annuity contracts by the existing insurer detected by the insurer's monitoring system as required by §A(1)(e) of this regulation ; and (e) Replacements, indexed by replacing insurance producer and existing insurer. C. Signed Statement and Notice. An insurer shall require with or as a part of each application for life insurance or an annuity: (1) A statement signed by the applicant and insurance producer indicating whether the applicant has an existing life insurance policy or existing annuity contract; and (2) If the applicant has an existing life insurance policy or existing annuity contract, a completed notice regarding replacements as contained in Regulation .10 of this chapter . D. Production of Information. If an applicant has an existing life insurance policy or existing annuity contract, an insurer shall be able to produce copies of the following items for at least 5 years after the termination or expiration of the proposed life insurance policy or annuity contract: (1) The sales material required by Regulation .04F of this chapter ; (2) The basic illustration and any supplemental illustrations related to the specific life insurance policy or annuity contract that is purchased; and (3) The insurance producer's and applicant's signed statements with respect to financing and replacement. E. Sales Material and Illustrations. An insurer shall ascertain and ensure that the sales material and illustrations required by Regulation .04F of this chapter : (1) Meet the requirements of this regulation; and (2) Are complete and accurate for the proposed life insurance policy or annuity contract. F. Application That Does Not Meet Requirements. If an application does not meet the requirements of this regulation, an insurer shall: (1) Notify the insurance producer and applicant; and (2) Fulfill the outstanding requirements. G. Record Keeping. An insurer shall maintain records in paper, photograph, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document.

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.06 Duties of Replacing Insurers that Use Insurance Producers. A. In General. If a replacement is involved in a transaction, the replacing insurer shall: (1) Verify that the required forms are received and are in compliance with this chapter; (2) Notify any other existing insurer that may be affected by the proposed replacement within 5 business days after: (a) Receipt of a completed application indicating replacement at the home office of the replacing insurer; or (b) A replacement is identified, if not indicated on the application; (3) Mail to an existing insurer a copy of the available illustration or life insurance policy summary for the proposed life insurance policy or available disclosure document for the proposed annuity contract within 5 business days after a request from the existing insurer; (4) Be able to produce copies of the notification regarding replacement required by Regulation .04C of this chapter , indexed by insurance producer, for at least 5 years or until the next regular market conduct examination by the insurance department of an insurer's state of domicile, whichever is later; and (5) Provide to the owner of the life insurance policy or annuity contract notice of the right to return the life insurance policy or annuity contract within 30 days after the delivery of the life insurance policy or annuity contract and receive: (a) An unconditional full refund of all premiums or considerations paid on the life insurance policy or annuity contract, including any life insurance policy fees or charges; or (b) In the case of a variable life insurance policy or variable annuity contract, a payment of: (i) The cash surrender value provided under the variable life insurance policy or variable annuity contract; and (ii) The fees and other charges deducted from the gross premiums or considerations or imposed under the variable life insurance policy or variable annuity contract, including surrender charges. B. Registered Contract. With respect to a registered contract, an insurer need not comply with §A(3) of this regulation if the insurer provides to the existing insurer, within 5 business days after a request from the existing insurer: (1) Premium or annuity contract contribution amounts; and (2) Identification of the appropriate prospectus or offering circular. C. Replacing Insurer and Existing Insurer Are the Same. If the replacing insurer and the existing insurer in a transaction are the same, or subsidiaries or affiliates under common ownership or control, the replacing insurer: (1) Shall allow credit for the period of time that has elapsed under the incontestability and suicide period of the replaced life insurance policy or annuity contract up to the face amount of the existing life insurance policy or existing annuity contract; and (2) With regard to financed purchases, may limit the credit to the amount that the face amount of the existing life insurance policy is reduced by the use of existing life insurance policy values to fund the new life insurance policy or annuity contract. D. Insurer that Requires Use of Approved Sales Material. If an insurer prohibits the use of sales material other than materials approved by the insurer, as an alternative to the requirements made of an insurer under Regulation .04F of this chapter , the insurer may: (1) Require with each application a statement signed by the insurance producer that: (a) The insurance producer used only insurer-approved sales material; and (b) Copies of all sales material were left with the applicant in accordance with Regulation .04E of this chapter ; (2) Within 10 days after the issuance of the life insurance policy or annuity contract: (a) Notify the applicant by written or by verbal communication by a person whose duties are separate from the marketing area of the insurer, that the insurance producer has stated that copies of all sales material have been left with the applicant in accordance with Regulation .04E of this chapter ; (b) Provide the applicant with a toll-free telephone number to contact insurer personnel involved in the compliance function if copies of all sales material have not been left with the applicant; and (c) Stress to the applicant the importance of retaining copies of the sales material for future reference; and (3) Be able to produce a copy of the letter or other verification in the life insurance policy or annuity contract file for at least 5 years after the termination or expiration of the life insurance policy or annuity contract.

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.07 Duties of Existing Insurer. A. In General. For replacement transactions, the existing insurer shall: (1) Retain and be able to produce all replacement notifications received, indexed by replacing insurer, for at least 5 years or until the conclusion of the next regular market conduct examination conducted by the insurance department of the insurer's state of domicile, whichever is later; and (2) Within 5 business days after receipt of a request from an owner of a life insurance policy or annuity contract, send a letter to the owner of the life insurance policy or annuity contract of the right to receive information regarding the existing life insurance policy or annuity contract values including, if available, an in-force illustration, or life insurance policy summary if an in-force illustration cannot be produced within 5 business days after receipt of a notice that an existing life insurance policy or annuity contract is being replaced. B. Registered Contract. With respect to a registered contract, an insurer need not comply with §A(2) of this regulation if the insurer provides to the owner of the life insurance policy or annuity contract, within 5 business days after receipt of a request from the owner: (1) Premium or annuity contract contribution amounts; and (2) Identification of the appropriate prospectus or offering circular. C. Request to Borrow, Surrender, or Withdraw Life Insurance Policy Values. (1) Upon receipt of a request to borrow, surrender, or withdraw life insurance policy values, an existing insurer shall send a notice, within 14 business days after receipt of the request, advising the owner of the life insurance policy that the release of life insurance policy values may affect the guaranteed elements, nonguaranteed elements, face amount, or surrender value of the life insurance policy from which the values are released. (2) The existing insurer shall send the notice separate from the check if the check is sent to anyone other than the owner of the life insurance policy. (3) In the case of consecutive automatic premium loans, the existing insurer is required to send the notice only at the time of the first loan.

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.08 Duties of Insurers with Respect to Direct Response Solicitations. A. Inquiry Regarding Intent. For an application initiated as a result of a direct response solicitation, the insurer shall require, with or as part of each completed application for a life insurance policy or annuity contract, a statement asking whether the applicant, by applying for the proposed life insurance policy or annuity contract, intends to replace, discontinue, or change an existing life insurance policy or existing annuity contract. B. Duties of Insurer if Replacement or Change Is Not Intended. If the applicant indicates a replacement or change is not intended or if the applicant fails to respond to the statement, the insurer shall send the applicant, with the life insurance policy or annuity contract, the notice regarding replacement in Regulation .11 of this chapter , or other substantially similar notice approved by the Commissioner. C. Duties of Insurer if Insurer Proposes Replacement or if Replacement Intended. (1) If an insurer has proposed a replacement or if the applicant indicates a replacement is intended, and the insurer continues with the replacement, the insurer shall: (a) Provide an applicant or prospective applicant with the life insurance policy or annuity contract a notice, as described in Regulation .12 of this chapter , or other substantially similar notice approved by the Commissioner; and (b) Comply with the requirements of Regulation .06A(2) and (3) of this chapter, if the applicant furnishes the names of the existing insurers, and the requirements of Regulation .06A(4) and (5) and C of this chapter. (2) If an insurer is required to provide a notice pursuant to §C(1)(a) of this regulation , the insurer may delete the references to the insurance producer, including the insurance producer's signature, and references not applicable to the product being sold or replaced, without having to obtain approval of the form from the Commissioner. (3) The insurer's obligation to obtain the applicant's signature shall be satisfied if the insurer can demonstrate that it has made a diligent effort to secure a signed copy of the notice required by §C(1)(a) of this regulation . (4) The requirement to make a diligent effort shall be satisfied if the insurer includes in the mailing a self-addressed postage-prepaid envelope with instructions for the return of the signed notice required by §C(1)(a) of this regulation .

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.09 Violations and Penalties. A. Prohibition on Twisting. A failure to comply with this chapter is a violation of Insurance Article, §27-213, Annotated Code of Maryland , including: (1) Deceptive or misleading information set forth in sales material; (2) Failing to ask the applicant, in completing the application, the pertinent questions regarding the possibility of financing or replacement; (3) Intentional incorrect recording of an answer; (4) Advising an applicant to respond negatively to any question regarding replacement in order to prevent notice to the existing insurer; or (5) Advising the owner of a life insurance policy or annuity contract to write directly to the insurer in such a way as to attempt to obscure the identity of the replacing insurance producer or insurer. B. Intent to Finance New Policy With Existing Policy Value—Individual Transaction—Prima Facie Case. (1) For purposes of a regulatory review of an individual transaction only, it is deemed prima facie evidence of a policyholder's intent to finance the purchase of a new life insurance policy with existing life insurance policy values if a withdrawal, surrender, or borrowing involving the life insurance policy values of an existing life insurance policy is used to pay premiums: (a) On a new life insurance policy owned by the same policyholder and issued by the same insurer; and (b) Within 4 months before or 13 months after the effective date of the new life insurance policy. (2) The prima facie standard established by §B(1) of this regulation is not intended to increase or decrease the monitoring obligations of an insurer under Regulation .05A(1)(e) of this chapter . C. Replacement After Indication That Replacement Not Intended—Pattern of Action—Prima Facie Case. (1) The owner of a life insurance policy or annuity contract may replace an existing life insurance policy or existing annuity contract after indicating in, or as a part of, an application for new coverage that replacement is not the intention of the owner. (2) Notwithstanding §C(1) of this regulation , if owners of life insurance policies or annuity contracts of the same insurance producer have a pattern of replacing life insurance policies or annuity contracts after indicating on the application that replacement is not their intention, the pattern of action is prima facie evidence of the insurance producer's: (a) Knowledge that replacement was intended in connection with the identified transactions; and (b) Intent to violate this chapter. D. Provision of Information. If it is determined that the requirements of this regulation have not been met, the replacing insurer shall provide to the owner of the life insurance policy or annuity contract: (1) An in-force illustration, if available, or life insurance policy summary for the replacement life insurance policy or available disclosure document for the replacement annuity contract; and (2) The appropriate notice regarding replacements in Regulation .10 or .12 of this chapter. E. Penalties. (1) An insurance producer who violates this chapter is subject to: (a) A penalty under Insurance Article, §10-126, Annotated Code of Maryland ; and (b) Forfeiture of commissions or compensation paid to the insurance producer as a result of a transaction in connection with which a violation occurred. (2) An insurer that violates this chapter is subject to a penalty under Insurance Article, §4-113, Annotated Code of Maryland .

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.10 Replacement Form A. REPLACEMENT OF LIFE INSURANCE OR ANNUITIES This document shall be signed by the applicant and the insurance producer, if there is one, and a copy left with the applicant. You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing life insurance policy or annuity contract. If so, a replacement is occurring. Financed purchases are also considered replacements. A replacement occurs when a new life insurance policy or annuity contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing life insurance policy or annuity contract, or an existing life insurance policy or annuity contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase. A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the life insurance policy values, including accumulated dividends, of an existing life insurance policy to pay all or part of any premium or payment due on the new life insurance policy. A financed purchase is a replacement. You should carefully consider whether a replacement is in your best interest. You will pay acquisition costs and there may be surrender costs deducted from your life insurance policy or annuity contract. You may be able to make changes to your existing life insurance policy or annuity contract to meet your insurance needs at less cost. A financed purchase will reduce the value of your existing life insurance policy and may reduce the amount paid upon the death of the insured. We want you to understand the effects of replacements before you make your purchase decision and ask that you answer the following questions and consider the questions on the back of this form. 1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing life insurance policy or annuity contract? _____YES _____NO 2. Are you considering using funds from your existing policies or annuity contracts to pay premiums due on the new life insurance policy or annuity contract? _____YES _____NO If you answered "yes" to either of the above questions, list each existing life insurance policy or annuity contract you are contemplating replacing (include the name of the insurer, the insured or annuitant, and the life insurance policy or annuity contract number if available) and whether each life insurance policy or annuity contract will be replaced or used as a source of financing:

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INSURER NAME

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ANNUITY CONTRACT OR LIFE INSURANCE POLICY #

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INSURED ANNUITANT

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REPLACED (R) OR FINANCING (F)

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1. ______________________________________________________________________

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2. ______________________________________________________________________

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3._______________________________________________________________________

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Make sure you know the facts. Contact your existing company or its agent for information about the old life insurance policy or annuity contract. If you request one, an in-force illustration, life insurance policy summary, or available disclosure document must be sent to you by the existing insurer. Ask for and keep all sales material used by the insurance producer in the sales presentation. Be sure you make an informed decision. The existing life insurance policy or annuity contract is being replaced because: _______________________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ I certify that the responses herein are, to the best of my knowledge, accurate. ________________________________ Applicant's Printed Name ________________________________ Applicant's Signature _________________Date ________________________________ Insurance Producer's Printed Name ________________________________ Insurance Producer's Signature _________________Date I do not want this notice read aloud to me. (Applicants must initial only if they do not want the notice read aloud.) A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing life insurance policy or annuity contract and the proposed life insurance policy or annuity contract. One way to do this is to ask the company or insurance producer that sold you your existing life insurance policy or annuity contract to provide you with information concerning your existing life insurance policy or annuity contract. This may include an illustration of how your existing life insurance policy or annuity contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare life insurance policies or annuity contracts. You should discuss the following with your insurance producer to determine whether replacement or financing your purchase makes sense: PREMIUMS: Are they affordable? Could they change? You are older—are premiums higher for the proposed new life insurance policy? How long will you have to pay premiums on the new life insurance policy? On the old life insurance policy? LIFE INSURANCE POLICY VALUES: New policies usually take longer to build cash values and to pay dividends. Acquisition costs for the old life insurance policy may have been paid, and you will incur costs for the new one. What surrender charges do the policies have? What expense and sales charges will you pay on the new life insurance policy? Does the new life insurance policy provide more insurance coverage? INSURABILITY: If your health has changed since you bought your old life insurance policy, the new one could cost you more, or you could be turned down. You may need a medical exam for a new life insurance policy. Claims on most new policies for up to the first 2 years can be denied based on inaccurate statements. Suicide limitations may begin anew on the new coverage. IF YOU ARE KEEPING THE OLD LIFE INSURANCE POLICY AS WELL AS THE NEW LIFE INSURANCE POLICY: How are premiums for both policies being paid? How will the premiums on your existing life insurance policy be affected? Will a loan be deducted from death benefits? What values from the old life insurance policy are being used to pay premiums? IF YOU ARE SURRENDERING AN ANNUITY OR LIFE PRODUCT: Will you pay surrender charges on your old annuity contract? What are the interest rate guarantees for the new annuity contract? Have you compared the annuity contract charges or other life insurance policy expenses? OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS: What are the tax consequences of buying the new life insurance policy? Is this a tax-free exchange? (See your tax advisor.) Is there a benefit from favorable "grandfathered" treatment of the old life insurance policy under the Internal Revenue Code? Will the existing insurer be willing to modify the old life insurance policy? How does the quality and financial stability of the new company compare with your existing company?

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.11 Replacement Form B. REPLACING YOUR LIFE INSURANCE POLICY OR ANNUITY? Are you thinking about buying a new life insurance policy or annuity and discontinuing or changing an existing one? If you are, your decision could be a good one—or a mistake. You will not know for sure unless you make a careful comparison of your existing benefits and the proposed life insurance policy or annuity contract's benefits. Make sure you understand the facts. You should ask the company or insurance producer that sold you your existing life insurance policy or annuity contract to give you information about it. Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest.

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.12 Replacement Form C.

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IMPORTANT NOTICE:

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REPLACEMENT OF LIFE INSURANCE OR ANNUITIES You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing life insurance policy or annuity contract. If so, a replacement is occurring. Financed purchases are also considered replacements. A replacement occurs if a new life insurance policy or annuity contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing life insurance policy or annuity contract, or an existing life insurance policy or annuity contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase. A financed purchase occurs if the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the life insurance policy values, including accumulated dividends, of an existing life insurance policy, to pay all or part of a premium or payment due on the new life insurance policy. A financed purchase is a replacement. You should carefully consider whether a replacement is in your best interest. You will pay acquisition costs and there may be surrender costs deducted from your life insurance policy or annuity contract. You may be able to make changes to your existing life insurance policy or annuity contract to meet your insurance needs at less cost. A financed purchase will reduce the value of your existing life insurance policy and may reduce the amount paid upon the death of the insured. We want you to understand the effects of replacements and ask that you answer the following questions and consider the questions on the back of this form. 1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing life insurance policy or annuity contract? _____YES _____NO 2. Are you considering using funds from your existing policies or annuity contracts to pay premiums due on the new life insurance policy or annuity contract? _____YES _____NO Please list each existing life insurance policy or annuity contract you are contemplating replacing (include the name of the insurer, the insured, and the life insurance policy or annuity contract number if available) and whether each life insurance policy or annuity contract will be replaced or used as a source of financing:

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INSURER NAME

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ANNUITY CONTRACT OR LIFE INSURANCE POLICY #

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INSURED ANNUITANT

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REPLACED (R) OR FINANCING (F)

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1. ______________________________________________________________________

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2. ______________________________________________________________________

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3._______________________________________________________________________

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Make sure you know the facts. Contact your existing company or its insurance producer for information about the old life insurance policy or annuity contract. If you request one, an in-force illustration, life insurance policy summary, or available disclosure document must be sent to you by the existing insurer. Ask for and keep all sales material used by the insurance producer in the sales presentation. Be sure that you make an informed decision. I certify that the responses herein are, to the best of my knowledge, accurate. ________________________________ Applicant's Printed Name ________________________________ Applicant's Signature _________________Date A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing life insurance policy or annuity contract and the proposed life insurance policy or annuity contract. One way to do this is to ask the company or insurance producer that sold you your existing life insurance policy or annuity contract to provide you with information concerning your existing life insurance policy or annuity contract. This may include an illustration of how your existing life insurance policy or annuity contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare policies or annuity contracts. You should discuss the following with your agent to determine whether replacement or financing your purchase makes sense: PREMIUMS: Are they affordable? Could they change? You are older—are premiums higher for the proposed new life insurance policy? How long will you have to pay premiums on the new life insurance policy? On the old life insurance policy? LIFE INSURANCE POLICY VALUES: New policies usually take longer to build cash values and to pay dividends. Acquisition costs for the old life insurance policy may have been paid, and you will incur costs for the new one. What surrender charges do the policies have? What expense and sales charges will you pay on the new life insurance policy? Does the new life insurance policy provide more insurance coverage? INSURABILITY: If your health has changed since you bought your old life insurance policy, the new one could cost you more, or you could be turned down. You may need a medical exam for a new life insurance policy. Claims on most new policies for up to the first 2 years can be denied based on inaccurate statements. Suicide limitations may begin anew on the new coverage. IF YOU ARE KEEPING THE OLD LIFE INSURANCE POLICY AS WELL AS THE NEW LIFE INSURANCE POLICY: How are premiums for both policies being paid? How will the premiums on your existing life insurance policy be affected? Will a loan be deducted from death benefits? What values from the old life insurance policy are being used to pay premiums? IF YOU ARE SURRENDERING AN ANNUITY OR LIFE PRODUCT: Will you pay surrender charges on your old annuity contract? What are the interest rate guarantees for the new annuity contract? Have you compared the annuity contract charges or other life insurance policy expenses? OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS: What are the tax consequences of buying the new life insurance policy? Is this a tax-free exchange? (See your tax advisor.) Is there a benefit from favorable "grandfathered" treatment of the old life insurance policy under the Internal Revenue Code? Will the existing insurer be willing to modify the old life insurance policy? How does the quality and financial stability of the new company compare with your existing company?

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Previous Chapter 04 Contracts on a Variable Basis

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Next Chapter 06 Notice of Nonforfeiture Provisions in Lapsed Life Policies

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