Replacement is the act of terminating a policy with an insurance company and replacing it with a new insurance policy. Since replacement involves generating a new commission for the agent it is highly regulated to protect the best interest of the consumer. There are two kinds of replacements, 1) an internal replacement – this involves both policies from the same company, and 2) external replacement – this involves two separate policies, each from different insurance companies. Replacement decisions should be carefully weighed and must be transacted to benefit the customer, not solely the agent.

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