What type of insurance requires that the agent must fully disclose the implications of policy replacement?

The correct answer is that life insurance and annuities require the agent to fully disclose the implications of policy replacement. This obligation is in place to ensure that consumers are fully informed about the potential consequences of replacing an existing policy with a new one. The replacement process can result in the loss of benefits, changes in coverage, or higher premiums, and it is crucial for agents to communicate these factors clearly.

Life insurance policies often have unique features, such as cash values or guaranteed benefits, that could be adversely affected if not thoughtfully considered during the replacement. Annuities, similar to life insurance, may entail surrender charges or the forfeiture of accumulated interest in certain circumstances if a policy is replaced.

These requirements are set forth in laws and regulations to protect consumers from unintended negative consequences of replacement, ensuring that they are making informed decisions regarding their financial plans and coverage.