A reason why letter is the one page in a life insurance file that explains your thinking. It tells the client, in writing, what you recommended and why it fits them.
Most advisors know they should send one. Plenty don't, or send something so generic it doesn't help. In FSRA's 2024-25 life agent supervision report, 15 of the life agents reviewed (16%) hadn't issued reason why letters to their clients. FSRA has been flagging this since at least 2022.
Here's how to write one that's useful to the client and holds up in an audit. There's a full sample at the end.
What a reason why letter is
A reason why letter (sometimes called a "reasons why letter" or "letter of recommendation") is a short written summary you give the client after the needs analysis and before or at application. It covers:
- What the client told you about their situation and goals
- How much coverage they need and how you got there
- What you recommended (carrier, product, amount, term, riders)
- Why that option fits better than the alternatives
- What the client decided, including anything they declined
It's written to the client, in plain language. It isn't a sales pitch and it isn't a policy summary.
Why regulators and MGAs expect it
The Fair Treatment of Customers guidance
In 2018 the Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) published Conduct of Insurance Business and Fair Treatment of Customers. Provincial regulators use it as the baseline for how advisors should treat clients. FSRA in Ontario has said it applies the guidance in its supervision.
One of the expectations is that advice takes the client's circumstances into account, and that the advisor can show it. A reason why letter is the simplest proof.
Industry best practice
The CLHIA's reference document The Approach: Serving the client through needs-based sales practices sets out needs-based selling: gather the facts, identify the need, recommend, explain, and keep records that show it.
Carriers say the same in their advisor material. Equitable Life's compliance resources list "conducting and documenting a needs analysis" and "providing a copy of the needs analysis, and a Reason Why letter" as expected practice.
Provincial councils audit files
The Insurance Council of BC's life practice audit asks how you conduct and document fact-finding and needs assessment, and how you make sure products are suitable. The Alberta Insurance Council's Code of Conduct sets a similar standard. If your file only has an application and a policy, you have nothing to show.
It protects you
If a claim is denied or a client complains five years later that they "were never told" the term would expire at 65, your letter is the record. A dated letter with the client's numbers in it is far stronger than your memory.
How to structure a reason why letter
Keep it to six short sections.
1. Header and purpose
Client name, date, your name, licence, and agency or MGA. One line on what the letter is: "This letter summarizes our conversation on October 14 and the reasons for my recommendation."
2. Your situation and goals
Two or three sentences in the client's own terms. Age, family, income, debts, and what they want the insurance to do. "You want your mortgage paid off and your two children supported until they finish school if something happens to you."
3. The need and how it was calculated
Show the maths in a few lines. Debts, income replacement, education, final expenses, minus existing coverage and assets. Name the method (for example, income replacement for a set number of years). If the client chose a lower amount than the calculation, say so.
4. Options considered
List the products and carriers you compared. A small table works well: carrier, product, amount, monthly premium. Two or three options is enough. Mention any type of coverage you considered and ruled out (for example, permanent coverage) and why.
5. Recommendation and reasons
The core of the letter. Say what you recommend and give three to five specific reasons tied back to section 2. Price is fine as one reason. It shouldn't be the only one. Include riders and why.
6. Important things to know, and the client's decision
- Term length and what happens at renewal or expiry
- Premiums and whether they are guaranteed
- That the coverage depends on underwriting and accurate answers
- Any replacement of existing coverage (and the separate disclosure that requires)
- How you're paid, and who you represent
- What the client decided, and anything they declined
End with your contact details and a line inviting questions.
Sample reason why letter (fictional client)
This is a fictional example for illustration. Names, numbers and premiums are made up.
Reason why letter
Client: Maya Thompson, age 34, Red Deer, Alberta Date: October 14, 2026 Advisor: Jordan Avery, Life and A&S licence (Alberta), Northline Financial
Dear Maya,
Thank you for meeting with me by video on October 14. This letter summarizes what we discussed and why I recommended the coverage below. Please read it and let me know if anything doesn't match your understanding.
Your situation and goals You are 34, a non-smoker, married to Chris, with two children aged 3 and 6. You earn $78,000 a year as a dental hygienist. You have a $410,000 mortgage with 22 years remaining and a $14,000 car loan. Your goal is that, if you died, your mortgage would be paid off and Chris would have enough income support to raise the children until the youngest is 18.
Your need - Mortgage and car loan: $424,000 - Income replacement: 70% of your after-tax income for 15 years, about $570,000 - Education fund for two children: $60,000 - Final expenses: $20,000 - Less group life coverage through work: ($156,000) - Estimated need: about $918,000
We discussed that your group coverage ends if you leave your job, so we did not rely on it for the long term. You chose to apply for $900,000.
Options we compared
Option Product Amount Monthly premium A Carrier 1, Term 20 $900,000 $48.15 B Carrier 2, Term 20 $900,000 $51.30 C Carrier 1, Term 25 $900,000 $61.20 We also discussed permanent life insurance. You told me your priority is the highest coverage during the years your family depends on your income, at a premium that fits your budget, so we set permanent coverage aside for now.
My recommendation: Option C, Term 25, $900,000 1. Your mortgage has 22 years left. A 20-year term would end before it is paid off. A 25-year term covers the full mortgage with a margin. 2. Your youngest child turns 18 in 15 years. Term 25 covers that with room to spare. 3. The premium is guaranteed for 25 years and fits within the $75 a month you set as your limit. 4. The policy can be converted to permanent coverage without new medical evidence, within the carrier's conversion window, if your needs change.
You decided to apply for Option C. You declined the child rider for now.
Important to know - Coverage is not in force until the carrier approves the application and the policy is delivered. The final premium depends on underwriting. - Your answers on the application must be complete and accurate. A misstatement can lead to a claim being denied. - The policy expires after 25 years unless renewed. Renewal premiums are much higher. - This policy does not replace any existing individual coverage. - I am an independent advisor contracted with several insurers. I am paid a commission by the insurer you choose, and you pay no fee to me.
If you have any questions, call or email me any time.
Jordan Avery Northline Financial
Common mistakes
- Copy-paste reasons. "This product meets your needs" says nothing. Tie each reason to a fact about the client.
- No numbers. If the need calculation isn't in the letter, the amount looks arbitrary.
- Only one option. Show what you compared, even if the winner was obvious.
- Leaving out what the client declined. That's the part that protects you most.
- Sending it after the policy is issued. The client should see it before they commit.
Making it faster
Writing a good letter by hand takes 20 to 40 minutes per case. Most of that is retyping numbers that already exist in your needs analysis and quote. A template with fields for the client's facts gets you most of the way there. In PolicyStream, the recommendation from the needs analysis carries straight into the reasons-why letter, which is signed by you and the client and saved in the compliance file. It's for Canadian advisors only and isn't available in Quebec yet.
This article is general information, not legal or compliance advice. Requirements vary by province, MGA and carrier, so check with your provincial regulator and your MGA's compliance team.
If you'd like to see that flow on a real case, start your 7-day free trial. No credit card needed.
Frequently asked questions
Is a reason why letter legally required in Canada?
There isn't one national rule that says 'send a reason why letter'. But the CCIR/CISRO Fair Treatment of Customers guidance expects advisors to document their recommendations, and regulators such as FSRA treat a missing reason why letter as a compliance gap. Most MGAs and carriers require one in the file.
Do I need a reason why letter if the client chose a different policy than I recommended?
Yes, and it matters even more. Record what you recommended, what the client chose instead, why, and that you explained the difference.
When should I send it?
Before or at the time of application, so the client can read it before they commit. Keep a copy in the client file with the date it was sent.
How long should it be?
One to two pages is plenty for most term and permanent life cases. It should be long enough to show your reasoning and short enough that the client actually reads it.
Can I use a template?
Yes, as long as the content is specific to the client. Regulators look for the client's own numbers and goals, not boilerplate.