Under California's life insurance illustration rules (CIC Sections 10509.950 et seq.), an illustration that shows cash values based on current, nonguaranteed interest or dividend scales must:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's illustration regulations require that any nonguaranteed elements, such as dividends or current interest rates used in cash value projections, be clearly labeled as not guaranteed, because actual results depend on the insurer's future mortality, expense, and investment experience. The illustration must distinguish guaranteed values from projected values so the buyer is not misled into treating a projection as a promise. This consumer-protection rule is central to the life insurance illustration framework and prevents the sale of policies on exaggerated assumptions.
Why the other options are wrong
- B) Illustrated values based on current scales are projections, not promises; only the contractual values in the policy are guaranteed. The signature page and narrative summary must be signed to confirm the buyer received the required information.
- C) Illustrations are typically presented during the sales process before delivery so the buyer can evaluate the policy before purchase. Only the policy's contractual provisions and explicitly guaranteed elements are binding promises under the contract.
- D) Illustrations must show the guaranteed values and clearly separate them from the nonguaranteed projections. Illustrations are presented during the sales process to help the applicant compare and evaluate coverage before purchase decisions are made.
Memory hook
Illustration = projection, not promise. If it depends on future interest, it must say not guaranteed.