Replacement can be defined as

• A. A policy rider addition
• B. A loan against policy
• C. A transaction in which a new policy is purchased and an existing policy is surrendered
• D. A policy conversion

Answer: (C)

Replacement is when you substitute existing coverage by obtaining a new life insurance policy and surrendering the old one. This definition captures the act of replacing what you have with something new, rather than merely changing terms or borrowing against cash value. The other scenarios don’t involve canceling an existing policy to take on a new one: adding a rider only changes coverage without ending the old policy; a loan against the policy uses its cash value but doesn’t replace the policy; and converting a policy (such as term to permanent) can be done within the same contract and isn’t necessarily a new policy that replaces the old one.