What is the process called when a life insurance contract is terminated and another is written in its place?

The process of terminating a life insurance contract and writing a new one in its place is known as replacement. In the context of life insurance, replacement refers to the action of canceling an existing policy in order to purchase a new one. This process is subjected to specific regulations to ensure that the policyholder is fully informed about the implications of the switch, including differences in coverage, costs, and possible loss of benefits.

Regulatory bodies, including those at the state level, require insurance agents to disclose the potential consequences of replacement to the policyholder, providing transparency and protecting consumers from making uninformed decisions. Replacement is a significant action as it can impact the policyholder’s financial and insurance coverage situation.

The other terms provided do not accurately describe this process. Reassignment typically refers to transferring the rights or benefits of a policy from one party to another. Termination simply denotes ending a policy without suggesting any new coverage is taken out. Policy switch may imply changing one policy's terms or conditions, but it does not specifically involve the creation of a new contract replacing an old one. Therefore, the correct term for this scenario is replacement.