New Jersey Life Producer Law Practice Test

What is typically excluded from a policy illustration given at the sale of an insurance policy?

1. The effective interest rate for policy loans

2. The coverage options available

3. The guaranteed minimum death benefit

4. The loan repayment terms

The correct answer is: The effective interest rate for policy loans

In the context of insurance policy illustrations, the effective interest rate for policy loans is commonly excluded because these rates can fluctuate and are not guaranteed. A policy illustration aims to provide a prospective policyholder with an overview of how a life insurance policy performs under ideal scenarios, such as assuming certain premium payments and conditions. In contrast, coverage options available, guaranteed minimum death benefits, and loan repayment terms are typically included in illustrations to offer clarity on the benefits, options, and the overall structure of the policy. Including the effective interest rate for policy loans could mislead consumers, as this rate may change and vary based on the insurer's policies. Therefore, its exclusion helps maintain the focus on guaranteed and assumed projections rather than speculative figures.