New Jersey Life Producer Law Practice Test

What must a life insurance producer acting as a consultant obtain to receive fees other than commissions?

1. A written memorandum from the prospect

2. An oral agreement with the client

3. A board approval

4. A license endorsement

The correct answer is: A written memorandum from the prospect

A life insurance producer acting as a consultant must obtain a written memorandum from the prospect to receive fees other than commissions. This requirement is in place to ensure transparency and to protect both the producer and the client. The written memorandum serves as a documented agreement outlining the terms of compensation for the consulting services provided. Having this formal understanding helps to clearly define the nature of the relationship, including the specific fees that will be charged, which reduces the risk of misunderstandings or disputes later on. This documentation can also provide a record that the producer is acting within the legal framework and adhering to the regulations set forth for life insurance producers. In contrast, informal arrangements or verbal agreements may not provide sufficient legal protection or clarity regarding the consulting relationship and fee structure. Therefore, having a proper written memorandum is essential for compliance and accountability in the insurance consulting process.