Replacement disclosure is the set of written explanations and comparisons provided to a client when a new life insurance or annuity sale will replace existing coverage. State replacement regulations typically require that advisors list all policies being affected, describe how they will change, and highlight potential disadvantages such as new contestability periods, surrender charges, altered guarantees, and tax implications. Clients must sign acknowledging receipt of this information. Replacement disclosure aims to protect consumers from unsuitable or misleading recommendations and to give regulators a paper trail for monitoring sales practices.

In daily operations, advisors and case managers complete replacement disclosure forms whenever applications indicate that existing coverage will be surrendered, reduced, or financed. They gather in-force ledgers from current carriers and incorporate those values in side-by-side comparisons. Compliance reviews ensure that forms are complete, signed, and submitted to both old and new carriers as required. During audits or complaint reviews, replacement disclosure documents are critical evidence of what was explained at the time of sale. Advisors who treat replacement disclosure as an educational tool rather than a mere formality strengthen client trust and reduce regulatory risk.