Colorado Life Producer License Practice Test

What type of term coverage is specifically mentioned under the replacement rules?

1. Convertible term

2. Nonconvertible term

3. Whole life

4. Universal life

The correct answer is: Nonconvertible term

The correct answer is nonconvertible term coverage in the context of replacement rules. Nonconvertible term coverage refers to a type of term life insurance that does not allow the policyholder to convert their term policy into a permanent policy at some point in the future. Replacement rules are established to protect consumers when they are considering replacing one insurance policy with another. Because nonconvertible term policies cannot be converted, they could present particular implications for consumers in terms of their coverage and options moving forward. Understanding the nonconvertible aspect helps inform potential policyholders about the limitations of such a policy when making decisions regarding their insurance needs. The other options like convertible term, whole life, and universal life do not pertain directly to the replacement rules as established for nonconvertible term coverage. Convertible term allows policyholders to convert to permanent life insurance, which has different considerations and implications under replacement rules compared to nonconvertible policies. Whole life and universal life are forms of permanent insurance that would not fall under the same category as term coverage in terms of the replacement rules being specified.