New Jersey Life Producer Law Practice Test

What should an applicant provide when an agent is replacing their life insurance policy?

1. Credit score

2. Financial statements

3. Justification for the replacement

4. Health records

The correct answer is: Justification for the replacement

When an agent is replacing a life insurance policy, the applicant must provide justification for the replacement. This requirement ensures that the decision to switch policies is in the client's best interest, as replacing an insurance policy can have significant consequences, such as loss of benefits, increased premiums, or changes in coverage terms. By justifying the replacement, the applicant demonstrates a clear understanding of the reasons behind the switch. This might involve discussing better rates, improved coverage, or changes in the individual's financial situation or insurance needs. The justification process serves to protect consumers from unnecessary policy changes and to promote responsible insurance practices. Other elements like credit scores, financial statements, and health records may play a role in the underwriting process for life insurance but are not specifically mandated as part of the replacement justification. Thus, focusing on the justification for the replacement is crucial for ensuring that the applicant is making an informed decision.