Pearson VUE Life Insurance Practice Exam

Group life insurance policies are typically exempt from the life insurance and annuity replacement rule because these policies are issued to a group rather than an individual. This exemption exists due to the nature of group insurance, where coverage is provided to members of an organization, such as employees of a company or members of a professional association.

The replacement rule is designed to ensure that consumers are fully informed about the implications of switching from one policy to another, particularly in terms of benefits and coverage. However, with group policies, the decision to maintain or replace coverage is often made at the organizational level rather than by individual policyholders, which diminishes the need for stringent consumer protection regulations that apply to individual policies.

Individual life insurance, universal life insurance, and whole life insurance are all personal policies that are more likely to involve significant changes in coverage and potential loss of benefits when replaced, making them subject to the replacement rule.