State RegulationsIL specificDifficulty 3/5
An Illinois producer recommends a large deferred annuity to a consumer after asking nothing about the consumer's income, existing assets, or financial objectives, explaining later that the product 'sells itself.' Under the suitability rule, what is the flaw in this recommendation?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
The Illinois suitability rule (50 Ill. Adm. Code 3120) conditions every life insurance and annuity recommendation on a reasonable basis built from information about the customer's financial situation, needs, and objectives. A recommendation made without that inquiry fails the standard regardless of how attractive the product appears, and the Illinois Department of Insurance can discipline the producer for the unsuitable recommendation; the consumer's freedom to decline does not substitute for the producer's duty.
Why the other options are wrong
- A) The consumer's right to decline does not relieve the producer of the duty to build a reasonable basis first.
- B) No product is inherently suitable for every consumer; suitability is assessed against the individual's circumstances.
- C) A signed application without questions does not cure the missing suitability analysis; the duty precedes the signature.
Memory hook
No questions asked, no basis found — an unsuitable recommendation.