Sarah, a young mother in Vancouver, BC, is considering replacing her existing whole life insurance policy, purchased five years ago, with a new universal life policy offering a lower premium and potentially better investment growth. Her advisor, David, believes the new policy is genuinely superior for her long-term goals. What is David’s primary obligation regarding the replacement process?

Question: Sarah, a young mother in Vancouver, BC, is considering replacing her existing whole life insurance policy, purchased five years ago, with a new universal life policy offering a lower premium and potentially better investment growth. Her advisor, David, believes the new policy is genuinely superior for her long-term goals. What is David’s primary obligation regarding the replacement process?

Answer options: ✅ He must complete a Life Insurance Replacement Declaration (LIRD) form and ensure Sarah reviews and signs it, then submit it to both the existing and new insurers.

• He must solely focus on the benefits of the new policy, as it aligns with Sarah's stated desire for lower premiums and growth potential.
• He is only required to inform Sarah verbally about potential disadvantages of replacement, as she initiated the discussion.
• He must submit the LIRD only to the new insurer, as they are issuing the new policy.

Correct answer: He must complete a Life Insurance Replacement Declaration (LIRD) form and ensure Sarah reviews and signs it, then submit it to both the existing and new insurers.

Explanation: When an advisor recommends replacing an existing life insurance policy, they are legally and ethically obligated to complete a Life Insurance Replacement Declaration (LIRD) form, ensure the client understands it, and submit it to both insurers involved, as per provincial insurance regulations and CISRO guidance.