Texas Life Agent Practice Exam

When are dividend projections permissible in a life insurance proposal?

1. When they can be assured

2. When there is a statement indicating they are not guaranteed

3. When the policyholder is a senior citizen

4. When the policy is non-participating

The correct answer is: When there is a statement indicating they are not guaranteed

In life insurance proposals, dividend projections are permissible when there is a clear statement indicating that they are not guaranteed. This requirement is in place to ensure that potential policyholders are fully informed about the nature of dividends associated with their insurance policies. Since dividends can fluctuate based on the insurer’s performance and are influenced by various factors such as investment results, mortality experience, and expenses, it is crucial that consumers understand that these payouts are not secure or ensured. Providing a disclaimer that dividends are not guaranteed helps to manage the expectations of policyholders, ensuring they are aware that while a company may have historically paid dividends, it does not mean they will continue to do so in the future. This transparency supports informed decision-making for customers and aligns with regulatory standards aimed at protecting consumers. In contexts where dividend projections are associated with guaranteed promises or are implied as certain, inconsistencies could arise, causing misunderstandings about the policy's potential benefit. Thus, ensuring clarity that these projections are not guaranteed is both ethical and a regulatory necessity in the life insurance industry.