Which type of life insurance is subject to replacement regulations?

Whole life insurance is the correct answer when considering types of life insurance that are subject to replacement regulations. Replacement regulations are designed to protect consumers from the potential negative impacts of replacing one insurance policy with another. These regulations primarily apply to permanent life insurance products, which include whole life insurance.

Whole life insurance generally involves an accumulation of cash value and guarantees a death benefit, making it a significant financial commitment for the policyholder. When a policyholder considers replacing their whole life insurance policy, they may be at risk of losing benefits or incurring surrender charges. Thus, replacement regulations require insurers to provide full disclosure of the implications of the replacement, ensuring that consumers can make informed decisions.

While term life insurance is typically not subject to these regulations due to its simpler nature and lack of cash value, ordinary life insurance is essentially a term that can encompass several types of permanent policies and is not specifically singled out in regulation terms. Universal life insurance, being another form of permanent policy, is also subject to similar regulations as whole life insurance.

In summary, the focus on whole life insurance in replacement regulations serves to protect consumers from potential drawbacks associated with changing their policies, especially since these types of policies often involve more complex considerations and long-term commitments.