A California agent sells a life policy with a chronic-illness accelerated death benefit (ADB) rider to a client who believes the rider is a long-term care (LTC) insurance policy. Under California law, the agent must:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California law requires clear disclosure of the differences between accelerated death benefits tied to chronic illness and long-term care insurance. Because the two products respond to needs in different ways, since LTC insurance is designed for custodial and skilled care while an ADB rider accelerates a portion of the life death benefit, a client could be misled about coverage scope and cost. The producer must explain these distinctions before the sale, consistent with the requirements governing accelerated death benefits, so the customer can make an informed choice and is not confused about what the rider covers.
Why the other options are wrong
- B) Silence is precisely the problem; the law requires affirmative disclosure when a rider could be confused with LTC coverage.
- C) Recommending cancellation and a Medicare supplement is unrelated advice and would itself create suitability problems; the correct action is disclosure.
- D) ADB riders are regulated insurance products in California, and the disclosure duty applies to them.
Memory hook
If it could be mistaken for LTC, tell the client the difference. The rider is not a care policy.