A California producer sells a life insurance policy with a chronic-illness accelerated death benefit rider. Under California Insurance Code Section 10295, the producer must disclose to the buyer:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California Insurance Code Section 10295 et seq. regulates accelerated death benefits, and Section 10234.93 together with the surrounding provisions requires that when a chronic-illness accelerated death benefit is sold, the consumer be told how that benefit differs from long-term care insurance. The disclosure prevents consumers from confusing a limited living-benefit rider with a true LTC policy, which has different triggers, benefits, and guarantees. This consumer-protection disclosure is a California-specific requirement that applies at the point of sale. The rule also protects elderly and vulnerable buyers from misclassifying a living-benefit rider as a full long-term care policy.
Why the other options are wrong
- B) The insurer’s complaint record is not part of the Section 10295 ADB disclosure. The mandated disclosure concerns the distinction between the accelerated death benefit and long-term care insurance.
- C) Commission percentage is a compensation disclosure issue. It is not the ADB-versus-LTC comparison that the statute requires the producer to make.
- D) Estate tax treatment is general tax advice. It is unrelated to the required disclosure about how the accelerated benefit differs from long-term care coverage.
Memory hook
ADB sale = read the fine line: this is NOT long-term care insurance. Disclose the difference, protect the buyer.