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You don’t need to remove the old fireplace if the electric fireplace unit will fit inside, or in front of, the existing hearth opening. However, you should permanently close off the fireplace chimney damper to prevent drafts and keep cold air out in winter.
Electric fireplaces do not produce any fire or flame and don’t require venting, or a flue or chimney. As a result, they are considered "zero clearance" and can be installed next to flammable materials such as wood. Measure the floor in front of the hearth and build a U-shaped 2x4 frame around the opening. Depending on the height desired for your new unit, this may have to be built up as necessary. Attach triangular corner blocks to reinforce the inside corners of the frame, then use screws to attach the frame to the floor (Image 1). Measure and cut the top plywood hearth board to fit over the 2x4 frame (Image 2), extending it into the existing fireplace opening. Level the top of this board, using wood shims, if necessary. Apply construction adhesive along the top of the 2x4 hearth frame. Set the top hearth board in place (Image 3). Drill countersink holes and add 1-1/2” wood screws to hold the board in place while the glue sets. Fill the screw holes with wood putty. Apply molding around the outside edge of the hearth frame as desired.
Attach mounting hardware for the new unit as specified by the manufacturer. Test fit the insert in the opening and check for level. Remove the insert and create an access hole in the existing hearth side for the unit’s electrical plug and cord. Use a masonry bit and a cold chisel as needed if you have to break through a tile, stone or concrete surround (Image 1). Route the electrical wire from the firebox through the hole and extend it to the nearest electrical outlet. Reinstall the firebox and attach it to the hearth (Image 2). Measure for the firebox surround frame. The design and construction of a suitable surround and mantel are up to the homeowner. Use 2x4s to frame the sides and top of the firebox, and use finished plywood for the facing.