What disclosures are typically required when replacing an existing life or health policy?

• A. Notices of replacement and the potential effects, including surrender charges and loss of existing benefits; required to ensure informed decision.
• B. Only the replacement policy numbers.
• C. A signed consent form from employer.
• D. No disclosures are required.

Answer: (A)

When replacing an existing life or health policy, the focus is on making sure the insured understands what is being given up and what may change with the new coverage. The required disclosures center on a Notice of Replacement that explains the potential effects of the change. This includes surrender charges that may apply to the old policy and the possible loss of existing benefits, such as rider protections, cash value, or favorable terms that won’t automatically carry over. Providing this information helps the consumer compare the old and new policies and make an informed decision about whether replacement is truly in their best interest. It also protects against pressure or misrepresentation by ensuring transparent details about costs, benefits, and coverage changes. Other options fall short because they don’t give the necessary information about how replacing a policy could affect the insured, such as simply supplying policy numbers or requiring employer consent, or claiming no disclosures are needed.