Final answer:
An agent must provide a replacement notice to the insurer along with the life insurance application when replacement is involved, to ensure that all parties are aware of the potential implications of such an action.
Step-by-step explanation:
When replacement is involved in applying for a new life insurance policy, the agent must provide the insurer with a replacement notice along with the application. A replacement notice is a document that formally records the intent to terminate an existing policy or commitment and replace it with a new one. This document serves several purposes, including ensuring that the policyholder understands the implications of replacement, such as the potential loss of benefits or the start of new contestability periods. It also allows the insurer to properly evaluate the proposed replacement in terms of suitability and the client's needs.