Texas Life Agent Practice Exam

When can dividend projections be included in a proposal for life insurance?

1. When the policy is term life insurance

2. When there is a clear statement that future dividends are not guaranteed

3. When the policy has been in force for at least five years

4. When the insurer is a mutual company

The correct answer is: When there is a clear statement that future dividends are not guaranteed

Including dividend projections in a proposal for life insurance makes sense only when there is a clear statement that future dividends are not guaranteed. This transparency is crucial for ensuring that prospective policyholders understand the nature of life insurance dividends, especially since they can vary based on the insurer's financial performance and other factors. By providing this clear disclaimer, agents and insurers help set realistic expectations for the insured about the potential for receiving dividends and the mechanisms behind these payments. This is important in fostering trust and ensuring that consumers make informed decisions regarding their insurance coverage. In contrast, while certain policies might be predisposed to dividends or exclusions, such as mutual company policies, including projections without a guarantee disclaimer is misleading and can lead to misunderstandings. Thus, clarity regarding the non-guaranteed nature of future dividends is essential.