Florida's Replacement Rule, in plain English.

What “replacement” means

Under Florida law (FL Admin Code 69O-151), a life insurance transaction is classified as a “replacement” when a new policy is purchased and, in connection with that purchase, an existing policy is surrendered, lapsed, converted, reduced in value, or otherwise modified. Even a partial reduction in the existing policy's face amount can trigger replacement requirements.

The Notice Regarding Replacement

When replacement is involved, Florida law requires the agent to provide you with a Notice Regarding Replacement — a standardized disclosure form — and a side-by-side comparison of your existing policy and the proposed policy. You must sign and receive the notice before the new application can be submitted. We take this requirement seriously. No application moves forward without it.

What you should consider before replacing a policy

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  Surrender charges

  Permanent life insurance policies often have surrender charges during the early years. Replacing the policy during this window means you pay a penalty on the cash value you receive.
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  Lost guarantees

  Older permanent policies may carry guaranteed interest rates or premium guarantees that no longer exist in the current market. Replacing the policy means forfeiting those guarantees.
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  New contestability period

  Every new life insurance policy starts a fresh two-year contestability period, during which the insurer can investigate and potentially rescind the policy if there was a material misrepresentation in the application.
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  MEC risk

  Replacing a policy in certain ways can cause it to become a Modified Endowment Contract (MEC), which changes the tax treatment of loans and withdrawals.
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  Tax consequences of a 1035 exchange

  If you have a permanent policy with cash value, a 1035 exchange allows you to move that value to a new policy without triggering income tax on the gain — if the exchange is structured correctly. An improperly structured exchange can generate a taxable event. Consult a qualified tax professional before proceeding.

When replacement actually makes sense

Replacement is appropriate when the new policy offers materially better terms — lower premiums for equivalent coverage, better death benefit, a more appropriate policy structure, or improved cash-value performance — and when the full cost of replacing (surrender charges, new contestability period, etc.) is outweighed by those benefits over a reasonable time horizon.

We will do that math with you, in writing, before you make any decision.