New Jersey Life Producer Law Practice Test

How can consumers protect themselves when considering the replacement of their life insurance?

1. By comparing only premiums

2. By thoroughly reviewing policy illustrations

3. By consulting with a family member

4. By relying on agent recommendations

The correct answer is: By thoroughly reviewing policy illustrations

Thoroughly reviewing policy illustrations is essential for consumers considering the replacement of their life insurance. Policy illustrations provide detailed projections of the policy's potential performance, including premium schedules, death benefits, surrender values, and cash value accumulations over time. This information allows consumers to understand how the new policy compares to their current one, not just in terms of premium costs but also in overall value and benefits provided. By evaluating the specifics presented in policy illustrations, consumers can discern how the proposed coverage meets their needs and financial goals. This careful examination helps them identify any significant advantages or drawbacks associated with the new policy, ensuring they make informed decisions rather than being swayed by superficial factors. Such an analytical approach is crucial since life insurance often involves long-term commitments that impact financial security.