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In the context of replacing an existing life insurance policy with a new one, certain actions are mandated to ensure compliance with regulatory standards and to protect the interests of all parties involved, especially the policyholder.

Notifying the existing insurer is crucial because it allows them to be aware of the change in the customer's insurance arrangements, which may affect their underwriting and claims processes. Similarly, notifying the applicant ensures that they are fully informed about the implications of replacing their policy, including any potential loss of benefits or waiting periods associated with the new policy. Completing the replacement forms is also a mandatory step, as these forms provide the necessary documentation to confirm that the replacement is being managed properly and that the applicant has been informed about any risks involved.

However, notifying the state insurance department is not a requirement for individual transactions. The department is primarily responsible for overseeing regulatory compliance and consumer protection within the insurance market. While there are scenarios where reporting to the state may be necessary, such as in cases of detailed complaints or violations, it is not a standard requirement during the process of replacing a life insurance policy. This distinction clarifies that direct interactions between the producer, the existing insurer, and the applicant are sufficient for the replacement process to proceed.