Exchange of Policy Clause Law and Legal Definition
Exchange of policy clause is the substitution of one policy for another accomplished by the agreement of the insurer and insured or pursuant to a policy provision. Exchange of Policy clause will not permit the exchange of an ordinary life policy for an ordinary life policy with disability benefits.
An exchange of policy clause in an ordinary life policy which permits an exchange without medical examination for a policy of the same amount and which provides for a higher rate of premium permits a substitution of policies only where the risk involved is identical with that assumed in the original policy. Under such clause, the insured may not require an exchange for other types of policies, such as a life policy in the same amount providing also for disability benefits. [Baine v. Continental Assurance Co., 21 Cal. 2d 1 (Cal. 1942)].