What action must an agent take when replacing an existing life insurance policy?

The correct action an agent must take when replacing an existing life insurance policy is to submit to the replacing insurer a list of the policies to be replaced. This step is crucial because it allows the insurer to understand the existing coverage that the client is currently holding. The intention behind this requirement is to ensure that the agent acts in the best interest of the client by providing transparent information about the new policy and how it compares to the old policy.

By submitting this list, the agent is facilitating the process of evaluating whether the new policy is indeed a suitable replacement, as it lays out the existing commitments and ensures that the client is made aware of potential gaps or benefits that might arise from the change. It’s part of a broader regulatory framework aimed at protecting consumers during the policy replacement process.

In contrast, while providing a copy of the new policy, notifying the previous insurer, and ensuring the client understands coverage differences are all important actions in the context of policy replacement, they are secondary to the obligation of informing the replacing insurer about the policy being replaced. These actions may also contribute to informed decision-making but do not specifically fulfill the regulatory requirement that an agent must adhere to in terms of elevating the understanding of the entire insurance transition at the initial stage.