2.3 Idaho Replacement Rules
Key Takeaways
- Idaho requires detailed written notice when replacing life insurance or annuities
- Producers must provide a Replacement Notice to the applicant
- Twisting (misrepresenting to induce replacement) is a serious violation
- A new 2-year incontestability period begins with replacement
Replacement occurs when a new life insurance policy or annuity is purchased with the intent to terminate or reduce an existing policy.
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
Required Disclosures
The producer must provide a Replacement Notice that includes:
| Item | Requirement |
|---|---|
| Comparison | Side-by-side of existing and new policy |
| Surrender Values | Current and projected values |
| Death Benefits | Comparison of coverage amounts |
| New Contestability | New 2-year period starts |
Prohibited Practices
Twisting
Twisting is misrepresenting an existing policy to induce replacement:
- Falsely claiming existing policy is worthless
- Misrepresenting surrender values
- Hiding surrender charges of replacement
Churning
Churning is excessive replacement of policies to generate commissions.
Exam Focus
For Idaho Replacement Rules, watch for the trigger event: an existing policy is being lapsed, surrendered, reduced, borrowed against, converted, or otherwise changed because a new policy is being sold. Exam questions often ask who must give notice, what comparison or disclosure must be delivered, and when the replacing insurer must review the transaction. The safest answer is usually the one that protects the applicant from losing guarantees, surrender values, incontestability protections, or existing underwriting status without clear written disclosure.
What is twisting in Idaho insurance law?
When a life insurance policy is replaced in Idaho, what happens to the incontestability period?