Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?

The Replacement rule is applicable in this scenario because it addresses situations where an applicant is replacing an existing insurance policy with a new one. This rule is designed to protect consumers from making decisions that could potentially lead to unnecessary losses of benefits or unintended gaps in coverage.

When an agent is aware that an applicant intends to cash in an old policy to fund a new insurance purchase, the agent has a responsibility to ensure that the applicant understands the consequences of this action. The Replacement rule requires agents to inform applicants about the potential loss of benefits, any waiting periods that may come with the new policy, and any additional costs involved in replacing the existing coverage. This process is critical because applicants may not be fully aware of the implications of discontinuing an old policy, especially regarding issues like accumulated cash value or guaranteed insurability.

Other concepts mentioned, such as the Disclosure rule, Reinstatement rule, and Conversion rule, deal with different aspects of insurance practices and consumer protection but are not directly related to the scenario where an existing policy is being replaced. Therefore, recognizing the Replacement rule in this context highlights the importance of ensuring clients make informed decisions when transitioning between insurance policies.