Replacement rules exist because swapping policies can cost the client surrender charges, a new contestable and suicide period, and higher premiums at an older age. California does not ban replacement; it requires disclosure so the client hears both sides.

1. What counts as a replacement (§10509.2): buying new life insurance or an annuity when the existing coverage is or will be lapsed, forfeited, surrendered or terminated; converted to reduced paid-up or extended term; amended to reduce benefits or term; reissued with less cash value; or pledged or borrowed against for more than 25% of its loan value. Conservation is the existing insurer's attempt to talk the owner out of replacing. 2. Application statements (§10509.4(a)): the applicant signs a statement on whether replacement is involved; the agent signs one on whether the agent knows replacement is or may be involved. 3. Notice Regarding Replacement (§10509.4(b)): presented no later than when the application is taken, signed by both applicant and agent, and left with the applicant. The agent lists the policies being replaced, leaves the applicant the originals or copies of all printed sales materials, and sends a copy of the notice to the replacing insurer. 4. Replacing insurer's duties (§10509.6): within 3 working days of receiving the application (or issuing the policy, if sooner), it notifies each existing insurer and sends a policy summary or ledger statement for the new policy. If the existing insurer tries to conserve, it must give the owner a summary of the existing policy within 20 days. 5. Free look: a replacement policy must give an unconditional 30-day right to a full premium refund (account value for variable products). 6. Records: insurers keep evidence of the notice, summaries and a replacement register for at least 3 years.