When offering a life insurance policy with a chronic illness accelerated death benefit rider in California, the agent must disclose how the rider differs from:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California law (CIC §10295 et seq. and §10234.93) requires agents who offer accelerated death benefit riders for chronic illness to disclose to the consumer how the rider differs from a standalone long-term care insurance policy. The accelerated benefit is paid as an advance against the life insurance death benefit, while LTC insurance is a separate policy providing care benefits without reducing a life insurance face amount. The disclosure ensures consumers understand that the rider is not a substitute for long-term care insurance and may not cover all long-term care needs.
Why the other options are wrong
- The required disclosure compares the rider to long-term care insurance; disability income insurance is a different product not covered by this specific comparison rule. This answer describes a different situation from the one in the question and is therefore incorrect under the facts given here.
- Medicare supplement, or Medigap, policies fill gaps in Medicare; the statutory disclosure specifically addresses the ADB-versus-LTC difference. This choice does not fit the arrangement described in the question, so it is clearly not the right option to choose.
- Annuities are retirement income products and are not the subject of the chronic illness accelerated death benefit disclosure requirement. Accordingly, this option is not correct because it does not match the specific rule or product that is described in the question.
Memory hook
California requires disclosing that a chronic-illness ADB rider is not an LTC policy.