Under California's life insurance illustration rules (CIC Section 10509.950 et seq.), an illustration must:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's life insurance illustration regulations require that illustrations be clear and fair, disclose the assumptions used, and distinguish guaranteed values from nonguaranteed, current-assumption values. Producers must present illustrations accurately and may not guarantee nonguaranteed elements or present projected values as certain. The regulations, found at CIC Section 10509.950 et seq., are designed to protect consumers from misleading sales materials that overstate future cash values. An illustration must show premiums, guaranteed values, and the nonguaranteed values based on current interest and expense assumptions, and it must identify which values are not guaranteed. This disclosure lets the applicant compare policies on a consistent basis.
Why the other options are wrong
- An illustration projects values based on current assumptions; it does not guarantee those projected values, which can change with interest rates and expenses.
- Premium information must be shown in a life insurance illustration; omitting premiums would make the illustration misleading.
- An illustration must show both guaranteed and nonguaranteed values side by side so the consumer can see the difference between the two.
Memory hook
Illustration = a forecast, not a promise. Guaranteed versus nonguaranteed must be labeled.