What must an agent disclose when making an insurance proposal that will replace an existing policy?

When an agent is making an insurance proposal that is intended to replace an existing policy, it is essential for them to provide a notice of replacement. This notice serves to inform the policyholder that their current insurance policy will be replaced with a new one if the proposal is accepted. This is a critical disclosure, as it ensures that the policyholder is fully aware of the implications of the replacement, including any potential gaps in coverage, changes in premiums, and differences in benefits.

The notice of replacement is designed to promote transparency and protect the interests of consumers by highlighting the importance of understanding how the new policy compares to the existing one. By mandating this disclosure, regulatory bodies aim to prevent potential issues such as lapses in coverage or misunderstandings about the benefits of the new policy versus the old. This proactive approach helps ensure that consumers make informed decisions regarding their life insurance needs.