A life insurance replacement transaction could result in a

• A. Surrender charge
• B. Premium increase
• C. Policy loan interest
• D. Administrative fee

Answer: (A)

When you replace a life insurance policy, you’re effectively ending an existing policy to fund a new one. If the old policy has cash value, you may surrender it as part of the replacement. Many cash-value policies impose a surrender charge if you surrender within a defined surrender-charge period. That potential deduction from the old policy’s cash value is why a replacement transaction could result in a surrender charge.

Premium increases are not a guaranteed result of replacement—they depend on the new policy’s structure and underwriting. Policy loan interest only comes into play if there is an outstanding loan against a policy, which isn’t automatically triggered by replacement. Administrative fees aren’t a standard consequence of replacement either.