What must happen before one policy replaces another

A replacement is the one insurance transaction where a household can give up protection it already owns and not learn the cost for years. Quebec does not treat it as an ordinary sale. The Autorite des marches financiers publishes a procedure with three documents, a notice that must reach head offices within five working days, and a requirement that proof of the sending date exist. It also places the burden of proof on the representative rather than on you. What follows is the published rule, read on 1 October 2026, and nothing else.

What counts as a replacement

The AMF procedure applies to insurance of persons. Life insurance is covered. So is critical illness insurance. So is the case where joining a group contract terminates an individual policy, which is a replacement even if nobody in the conversation used that word. Individual annuities and endowment contracts are excluded from the regime.

An amendment to an existing contract is not a replacement. If the change happens inside the contract you already hold, the procedure does not attach. That line matters, because the paperwork and the deadline exist only on a replacement. A reader told that nothing is being replaced, only adjusted, can check that claim against this definition before signing anything.

The procedure page gives no statute section numbers. The form itself prints one legal reference: Division VII of the Regulation respecting the pursuit of activities as a representative, R.R.Q., c. D-9.2, r. 10, under An Act respecting the distribution of financial products and services. That is the only citation published on the documents read here. The form carries an update date of 16 August 2022.

Three documents, completed and explained

The form is explicit that three documents must be completed and explained on a replacement: the analysis of your needs, the Prior Notice of Policy Replacement, and the insurance proposal. Completed is one duty and explained is a second one. A signature on a document nobody walked you through does not satisfy the published requirement.

You sign the notice and initial each page, and that must happen no later than the date the new policy is delivered. The explanation has a prescribed shape: the representative delivers and explains the notice by comparing your current contract against the proposed one, and documents the advantages and the disadvantages of the change. Disadvantages are named in the requirement, not left to judgement.

The needs analysis is not a formality either. The AMF brochure for consumers says it must evaluate the features of the policy, family obligations, financial situation and income. Alongside it the representative must hand over a distribution guide covering the type of insurance, its scope and its exclusions, must ask whether you already hold similar policies, must explain claims procedures and timelines, and must tell you how to appeal if a claim is refused. If that last step was skipped, the complaint route is published separately.

Five working days, and proof of the sending date

The deadline is short and it is specific. The completed notice must be sent within five working days of the signing of the insurance proposal. It goes to the head office of every insurer whose contract may be cancelled, and it also goes to the new insurer. Every insurer whose contract is in play is told, in writing, at its head office.

The clock runs from the signing of the proposal, not from the delivery of the new policy. The two dates can be weeks apart, so a household that assumes the deadline begins when the new contract arrives has the sequence backwards.

Proof of the sending date is required. The page says that much and no more. It does not say what form the proof must take, who keeps it, or for how long. It does not say what becomes of a replacement when the notice goes out late. Those silences are worth naming, because a reader cannot look up an answer the regulator has not published.

The burden of proof sits with the representative

Two sentences on the AMF page carry most of the weight. A representative may not encourage cancellation of an existing policy in favour of a new one. The replacement must be justified in the interest of the purchaser or the insured, and the representative bears the burden of proof.

That reverses what most people assume. You are not required to show you were poorly served. The representative has to be able to show the replacement served your interest, and the documents are how that showing is made. This is why the needs analysis and the comparison are substantive and not administrative: they are the record that the burden was met.

Compensation sits inside the same disclosure duty. The brochure says compensation must be revealed when it is more than thirty per cent of the cost of the insurance. The brochure does not say the amount must be disclosed when it falls below that line, and it does not set a form for the disclosure. The firm behind the transaction is registered and that registration can be checked; what an AMF registration covers is a separate question from what any individual transaction discloses.

The new policy must be in force before the old one is cancelled

The brochure states the order plainly. On a replacement the representative must verify that the new policy is in force before the old one is cancelled. The reason is not procedural. If the old contract ends first and the new one is then declined or issued on different terms, the household is uninsured in the gap, and health that has changed in the meantime cannot be unchanged to buy the old protection back.

The same passage requires the representative to disclose tax implications and fees on a replacement. Disclosure is not advice. This practice does not prepare tax returns and does not give tax advice; a tax question about a replacement belongs with an accountant. Where ownership or beneficiary wording is being rewritten at the same time, that belongs with a notary or a lawyer.

After the new contract exists, the form describes a further window: most insurers allow a ten day period to terminate the new contract without charge. The wording frames this as varying by insurer rather than as a statutory right, and it requires the representative to confirm eligibility. Before issue the position is simpler, because the form says the client may terminate the purchase at any time before the contract is issued. One more change is worth knowing: since November 2019 internet insurance sales in Quebec no longer require a certified representative, while firms must still provide appropriate advice. The brochure does not say how the replacement procedure is carried out when no certified representative is involved.

Two clocks go back to zero

This is the harshest consequence of a replacement and it is easy to miss. The AMF states that the suicide clause period returns to zero when a life insurance contract is replaced. A period that had already run out on a contract held for years can start again from the beginning on the new one. Nothing is carried over.

The two year incontestable clause restarts on a new contract by the same logic. Time served on the old contract does not transfer. The contestability period is what lets an insurer reopen the answers given on the application, and a replacement puts that window back at the start.

These two consequences appear on the AMF page about cancelling a life or health insurance contract, not on the replacement procedure page. A reader following only the procedure page would never meet them. Neither source says the restarted periods can be credited or shortened on account of the old contract.

The checklist to hold up against the conversation

Five published requirements are enough to judge a replacement conversation while it is happening. First, three documents completed and explained: the needs analysis, the Prior Notice of Policy Replacement, and the insurance proposal, with your signature on the notice and your initials on each page no later than the day the new policy is delivered. Second, the notice sent within five working days of the signing of the proposal, to the head office of every insurer whose contract may be cancelled and to the new insurer, with proof of the sending date.

Third, confirmation that the new policy is in force before the old one is cancelled. Fourth, compensation revealed when it is more than thirty per cent of the cost of the insurance. Fifth, a plain statement that the suicide clause period and the two year incontestable clause both return to zero on the new contract.

None of this says a replacement is a good idea or a bad one. That question depends on facts no article can see. What the published rules do give a household is the ability to tell, within a single meeting, whether the procedure is being followed, and to ask for the document that is missing before anything is signed.

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The sharpest cost of a replacement is a clock, so read the contestability period next: it explains the two year window that a new contract puts back at zero. If the aim is a different kind of coverage rather than a different insurer, the term conversion privilege changes a contract you already hold, which the AMF does not treat as a replacement at all. The mistakes that undo a policy covers the other ways protection quietly disappears, and what an AMF firm registration means tells you what the registry does and does not vouch for. If a required document was never explained to you, the complaint route sets out where the file goes.