What is the purpose of a 'replacement' regulation in life insurance?

Replacement occurs when a new life insurance policy is purchased and an existing policy is terminated, lapsed, or otherwise reduced in value in connection with the new sale. Because replacement can disadvantage the consumer — new contestability and suretment periods, surrender charges, higher premiums due to older age — state replacement regulations require specific disclosures and procedures so the consumer makes an informed decision. Agents typically must provide notice and documentation, and insurers must follow defined steps. The purpose is consumer protection, not to prohibit replacement outright. Understanding replacement rules is standard regulations content on the life insurance exam.