Georgia Replacement Rules

Replacement occurs when a new life insurance policy or annuity is purchased with the intent to terminate, surrender, or reduce coverage under an existing policy. Georgia has detailed regulations to protect consumers.

Definition of Replacement

A replacement occurs when a new policy is purchased and:

• An existing policy is lapsed, forfeited, or surrendered
• Policy values are reduced or borrowed
• Coverage is converted or reduced
• Policy is reissued with reduced values
• Policy is amended to reduce benefits

Required Disclosures

Notice Regarding Replacement

The producer must provide the applicant with a written Notice Regarding Replacement that includes:

Producer Duties

The producer must:

1. Ask if applicant has existing coverage
2. List all existing policies being replaced
3. Provide comparison of old and new coverage
4. Explain potential disadvantages of replacement
5. Obtain applicant signature on replacement notice

Notice to Existing Insurer

Within 5 business days of receiving the application, the replacing insurer must notify the existing insurer:

• Name of policyholder
• Policy number being replaced
• Name of replacing insurer
• Date of application

Conservation Period

The existing insurer has 20 days to contact the policyholder:

• Explain the value of existing coverage
• Offer options to preserve the policy
• Cannot make false statements about new insurer or policy
• Must respect policyholder's final decision

Exam Tip: The 20-day conservation period allows the existing insurer to make a case for keeping the current policy. This is a consumer protection to ensure the replacement decision is fully informed.

Prohibited Practices

Twisting

Twisting is the practice of misrepresenting the terms or benefits of an existing policy to induce a policyholder to replace it.

Examples of twisting:

• Falsely claiming existing policy is "worthless"
• Misrepresenting surrender values
• Hiding surrender charges of replacement
• Exaggerating benefits of new policy
• Creating false urgency to replace

Penalties for twisting:

• License suspension or revocation
• Fines up to $10,000 per violation
• Civil liability to harmed consumers
• Criminal prosecution in severe cases

Churning

Churning is excessive replacement of policies to generate commissions.

Red flags for churning:

• Multiple replacements in short periods
• Same client replacing policies repeatedly
• Pattern across producer's book of business
• Surrender charges not disclosed

Records Retention

Georgia requires insurers and producers to maintain replacement records for:

Producer Responsibilities

Before recommending a replacement, the producer must:

1. Compare the existing and proposed policies objectively
2. Consider whether replacement is in client's best interest
3. Disclose all relevant information including costs and new contestability period
4. Document the basis for the recommendation
5. Ensure client understands the consequences