California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthMedium
A life insurance agent is presenting a policy illustration to a prospective client. According to California regulations, which of the following statements MUST be included in the illustration?
- AA projection of investment returns for the next 50 years, regardless of policy type.
- BA comparison of the policy's performance against a major stock market index.
- CA statement that the illustration is not a part of the insurance contract.
- DA guarantee that the illustrated values will be realized if premiums are paid as scheduled.
Show answer & explanationAnswer & explanation
Correct answer: C. A statement that the illustration is not a part of the insurance contract.
California regulations regarding policy illustrations mandate clear and conspicuous disclosures. A key requirement is that the illustration must state that it is not a part of the insurance contract and that the values shown are not guaranteed, unless explicitly stated otherwise for guaranteed elements.
Why the other options are wrong
- A. Illustrations generally project for a shorter, more reasonable period, and market comparisons are not mandatory disclosures.
- B. Comparing to a stock market index is not a required component of a standard life insurance policy illustration.
- D. Illustrations cannot guarantee non-guaranteed values; this would be misleading.
Life Policy Illustrations (CA)
Life insurance policy illustrations in California must clearly state they are not part of the contract and that non-guaranteed values are not guaranteed.
- Must be clear, complete, and accurate.
- Distinguish between guaranteed and non-guaranteed elements.
- Agent must sign and leave a copy with the applicant.
Memory trick: Illustrations are good, but always warn and sign.