News Articles

Compliance | Life Insurance Replacement Declaration

Ontario’s new Life Insurance Replacement Declaration (LIRD) will replace the old obsolete Life Insurance Disclosure Form as of April 1, 2011 with implementation of amendments to Regulation 674. Please ensure that you review these requirements with your administrators and marketing assistants. The new Replacement Declaration is intended to address the issues being experienced with the growing complexity of life insurance products.

The new disclosure approach supports financial literacy by helping ensure consumers understand the financial products in which they are investing. Ontario joins Alberta, Manitoba and Saskatchewan in adopting the harmonized LIRD.

This disclosure is required when a consumer is considering purchasing a new life insurance contract to replace a contract that is rescinded, lapsed, surrendered, changed to paid-up insurance, changed in any manner that results in a reduction of benefits or other circumstances described in Section 1 of Regulation 674. Please note that the disclosure statement is required at time of application, and agents should not wait until approval of the policy to submit this form.

Section 2, Item 3 of Regulation 674 states:
(3) within three working days after receiving an application for a contract of insurance, the agent shall forward a copy of each completed life insurance replacement declaration, as reviewed with the applicant by the agent and signed by the applicant, to every insurer whose life insurance contract is intended to be replaced.

The new LIRD provides eleven questions the consumer is encouraged to ask the agent about replacing the existing policy. The agent will also provide a separate written detailed explanation of the advantages and disadvantages of replacing the policy that addresses the consumer’s specific needs. FSCO expects the written explanation to be clear and comprehensive so the consumer or anyone else reading it would understand:

  • Why the existing policy does not meet the client’s needs;
  • How the new policy would meet those needs; and
  • The risks associated with replacing the existing policy.

The agent and applicant must sign both the LIRD and the written explanation to confirm receipt of the documents. If the applicant is not the life insured under the policy, the agent must obtain the insured person’s signature on a copy of the written explanation to confirm receipt. The agent is required to send copies of the signed materials with the application to the new insurer. The signed LIRD — but not the detailed explanation — must be sent to the existing insurer within three business days of completing the application for replacing a life insurance policy. (As recommended by FSCO, please ensure that the LIRD includes the Life Insurance Company, policy holder’s name, and policy number receiving the form.

Please note that FSCO has not provided any type of template or samples of these written explanation. To assist some of you through this transition, we have included a sample template, which is to be used as a guide only. Please be advised that each advisor should develop the written explanation for each policy on the basis of the type of insurance being replaced and purchased. Under no circumstances should this template be copied and simply completed.

For further information, please visit FSCO’s website at

Reference Documents:

Leave a Reply