New Jersey Life Producer Law Practice Test

What is one primary purpose of providing a policy illustration to a prospective policyholder?

1. To confirm the agent’s commission structure

2. To clarify the expected benefits of the policy

3. To outline the application process in detail

4. To list all policy exclusions

The correct answer is: To clarify the expected benefits of the policy

Providing a policy illustration to a prospective policyholder primarily serves to clarify the expected benefits of the policy. This illustration is a visual representation that helps the individual understand how the policy functions, including projections of cash value accumulation, death benefit amounts, and the impact of various factors such as premiums paid over time. It aids in setting proper expectations about what the policy can deliver, enabling the potential policyholder to make an informed decision. While confirmation of the agent's commission structure, outlining the application process, or listing all policy exclusions can be important aspects of insurance discussions, these elements do not primarily aim to convey the core benefits of the insurance product itself. The policy illustration specifically focuses on demonstrating the value and benefits of the policy, making it a crucial tool in the decision-making process for customers considering insurance options.