What is required in the application process if a life insurance policy is being replaced?

In the application process for a life insurance policy replacement, obtaining the applicant's justification for suitability is essential. This requirement ensures that the new policy is appropriate for the client's needs and that they understand the implications of replacing their existing coverage. The suitability justification helps protect consumers by promoting financial literacy and prudent decision-making when considering whether a new policy will better meet their needs than their current one.

This process is part of regulatory measures aimed at preventing inappropriate replacements that could result in the applicant lacking necessary coverage or incurring unnecessary costs. Ensuring that the client has clarity on why the replacement is beneficial not only fosters transparency but also builds trust in the insurance process.