In which type of life insurance does replacement regulation primarily apply?

Replacement regulation primarily applies to ordinary life insurance because this type of insurance is often sold on an individual basis and involves a direct interaction between an agent and the policyholder. Replacement regulations are designed to ensure that consumers are fully informed about the implications of replacing an existing life insurance policy with a new one. The rules mandate that insurance agents provide specific disclosures to clients, detailing the benefits and disadvantages of switching policies, in order to protect policyholders from potential financial harm due to lapsing old policies or misunderstanding new product features.

In the context of ordinary life insurance, these regulations help ensure that consumers do not face unintended consequences, such as loss of coverage or additional costs, which can occur during the transition from one policy to another. Since ordinary life insurance is typically more individualized, it presents a higher risk of market confusion, making replacement regulations particularly relevant to this category. Other types of life insurance, like group life, variable life, and whole life, may have different regulatory implications due to their structure and sales processes, which is why replacement regulation is not as significant in those areas.