Maryland Life and Health Insurance License Practice Exam

When a producer is replacing an existing ordinary life insurance policy, which of the following actions is NOT required?

1. Obtain the beneficiary's signature

2. Provide a written notice to the applicant

3. Explain the advantages of the new policy

4. Notify the existing insurer

The correct answer is: Obtain the beneficiary's signature

Obtaining the beneficiary's signature is not a requirement when a producer is replacing an existing ordinary life insurance policy. In the context of replacing life insurance, the focus is on the relationship between the producer and the policyholder (the applicant), as well as the obligations to inform and protect the interests of the applicant during the transition to a new policy. When an insurer or producer is replacing a policy, they are required to take specific actions to ensure transparency and informed decisions. This includes providing a written notice to the applicant, which outlines the implications of the replacement, notifying the existing insurer about the replacement to facilitate communication regarding the policy in question, and explaining the advantages of the new policy to ensure that the applicant understands the benefits they will receive. Since the beneficiary isn't directly involved in the decision-making process about replacing the policy—it's the policyholder who needs to understand the terms and conditions of both the old and new policies—obtaining the beneficiary's signature is not a mandated action in this scenario. This distinction underlines the importance of protecting the applicant's rights while not needing to engage the beneficiary in the replacement process.