A replacement occurs when a new life insurance policy is purchased, and the existing policy is surrendered, terminated, or its benefits reduced to make way for the new policy.
Replacement (B): This is regulated to ensure the policyholder is not disadvantaged by switching policies, often requiring additional disclosures and forms, like Maryland’s "Important Notice Replacement of Life Insurance or Annuities."
Nonforfeiture (A): Refers to retaining cash value benefits when a policy lapses or is canceled, not applicable here.
Reinvestment (C): Generally relates to financial or investment accounts, not life insurance.
Rollover (D): Pertains to tax-advantaged accounts like IRAs, not applicable to insurance.
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