Under California's life insurance illustration rules, an illustration that shows projected (non-guaranteed) values must also prominently disclose:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's illustration regulations (CIC Section 10509.950 et seq.) require that a life insurance illustration clearly distinguish between guaranteed and non-guaranteed elements. When projected values are shown, the corresponding guaranteed values must also be presented so the consumer understands that the illustrated dividends, credited rates, or cash values are not promises. This disclosure combats misleading sales by preventing an agent from presenting optimistic projections as if they were contractual guarantees. The illustration is an educational sales document, not the policy contract, and the policy itself remains the controlling document.
Why the other options are wrong
- B) The producer’s commission is not a required element of the illustration disclosure. The illustration focuses on the policy’s premium, death benefit, and cash values, not on the compensation paid to the agent.
- C) The insurer’s investment portfolio holdings are not disclosed in a life insurance illustration. Such internal financial information is not part of the consumer disclosure required by the illustration rules.
- D) The insured’s medical history is not part of the sales illustration. Medical information is gathered through the underwriting process and is not shown in the illustration presented to the consumer.
Memory hook
Illustration = show the floor and the sky. Guaranteed values keep the projected dreams honest.