A life insurance replacement transaction could result in which of the following charges?

• A. Policy loan interest
• B. Premium tax
• C. Surrender charge
• D. No benefit changes

Answer: (C)

Replacement transactions can trigger surrender charges because canceling or surrendering the old policy to fund the new one often happens within the policy’s surrender period. Surrender charges are fees deducted when a policy is surrendered or cash value is withdrawn early, so this is the most likely charge to appear in a life insurance replacement. Policy loan interest only arises if there’s an outstanding loan on the policy, not simply from replacing the policy. Premium tax isn’t a typical charge tied to the replacement itself, and “no benefit changes” isn’t a charge at all. So the surrender charge best explains the potential cost in a replacement.