When an agent recommends that a client replace an existing life insurance policy with a new one, what is a mandatory step in the process?

Question: When an agent recommends that a client replace an existing life insurance policy with a new one, what is a mandatory step in the process?

Answer options:

• Ensure the client qualifies for a higher death benefit.
• Report the previous agent to the provincial regulator. ✅ Complete a Life Insurance Abandonment/Replacement Form (LIAF) or disclosure document.
• Cancel the existing policy immediately before the new one is approved.

Correct answer: Complete a Life Insurance Abandonment/Replacement Form (LIAF) or disclosure document.

Explanation: Providing a LIAF (or similar disclosure document) is mandatory in most provinces when replacing a policy. It ensures the client is aware of the costs, loss of dividends, and new contestability periods associated with the new policy compared to the old one.