Question

Since Joanna's client's marital and financial status have changed over the years, she is suggesting that the client cancel her existing policy and purchase a more appropriate policy with a different life insurance company. Given this scenario, which of the following terms best describes Joanna's behavior?

A. Policy conversion
B. Policy surrender
C. Policy replacement
D. Policy lapse

Answer 1

Joanna's behavior of recommending her client to cancel an existing policy to purchase a new one with a different life insurance company is described as Policy replacement.

Step-by-step explanation:

If Joanna's client's marital and financial status have changed, and she is recommending that her client cancels her existing policy to purchase a new one with a different life insurance company, this is best described as Policy replacement. It's not a policy conversion, which would mean changing the policy while staying with the same insurer, nor a policy surrender, which would involve ending the policy without replacing it. A policy lapse refers to a policy ending because premiums were not paid. Policy replacement occurs when a new policy is taken out to better suit the changing circumstances of the insured, in this case due to retirement and lifestyle changes.