State RegulationsTN specificDifficulty 2/5
A Tennessee producer presents an illustration showing large projected dividends. The applicant asks whether those dividends are promised. What is the correct answer under Tenn. Comp. R. & Regs. 0780-1-40?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Tenn. Comp. R. & Regs. 0780-1-40 requires nonguaranteed elements to be presented as such: they are not promises, and the amounts actually paid may vary from the illustration. The applicant's signed acknowledgment in the application process exists precisely so no one later mistakes a projection for a guarantee, a point the Tennessee Department of Commerce & Insurance builds into its illustration rule.
Why the other options are wrong
- A) An illustration is not a contract; only the policy creates binding obligations, and T.C.A. § 56-7-2307 governs what the policy must contain.
- B) Dividend stability is beside the point; the rule forbids presenting nonguaranteed elements as assured regardless of history.
- C) The rule requires an acknowledgment that values are not guaranteed, not a waiver of the dividends themselves.
Memory hook
Projections persuade; promises live in the policy — never say guaranteed.