What is the practice of terminating an existing insurance policy and obtaining a new one called?

The practice of terminating an existing insurance policy and obtaining a new one is referred to as replacement. This process involves a policyholder choosing to discontinue their current insurance coverage in favor of a different policy that might offer better coverage terms, lower premiums, or other benefits that better meet their needs.

Replacement can be a significant decision because it may involve costs, such as surrender charges and potential loss of benefits like accrued cash value in life insurance policies. It is also subject to regulatory guidelines to ensure that consumers are fully informed about the implications of replacing their existing coverage. The key aspect of this term is the transition from one policy to another, highlighting the importance of understanding both the new policy being adopted and the existing policy being terminated.

Other terms might refer to different actions; for instance, renewal typically involves extending the coverage of the same policy rather than replacing it. Conversion generally relates to changes in the type of policy without terminating the existing one, and revocation refers to the cancellation of a decision or agreement, which is not applicable here.