An agent suggests a client replace an existing whole life policy with a new universal life policy. What is the agent's primary regulatory obligation during this process?

Question: An agent suggests a client replace an existing whole life policy with a new universal life policy. What is the agent's primary regulatory obligation during this process?

Answer options:

• The agent should close the sale immediately to protect the client's interests.
• The agent is not required to do anything if the client initiates the request.
• The agent should notify the original insurer and wait 30 days. ✅ The agent must complete a Life Insurance Replacement Declaration (LIRD) and a written comparison.

Correct answer: The agent must complete a Life Insurance Replacement Declaration (LIRD) and a written comparison.

Explanation: This is a classic 'churning' or 'twisting' scenario. The agent must provide a written comparative analysis (LIRD) to ensure the client understands the implications of replacing the policy.