New Jersey Life Producer Law Practice Test

Which of the following is NOT typically included in a policy illustration at the time of sale?

1. The cash value of the policy

2. The names of the insured

3. The projected premiums and benefits

4. The death benefit amount

The correct answer is: The cash value of the policy

In life insurance policy illustrations, the essential aim is to provide a clear and comprehensive representation of the policy structure, including its costs and benefits, in a way that consumers can understand. One key detail that is typically omitted in policy illustrations at the time of sale is the cash value of the policy. While policy illustrations do include projected premiums and benefits, the death benefit amount, and the names of the insured, they do not usually present the cash value prominently at the outset. Cash value is a component of some life insurance policies, particularly whole and universal life insurance, which accumulates over time. However, showing cash value in illustrations can be misleading since it suggests a certainty that may not reflect future performance due to varying factors like interest rates and policy charges that could affect its growth. This approach helps ensure that the consumer's focus remains on the primary benefits of the policy (like the death benefit and premiums), rather than on cash accumulation that may change over time and might distract from the policy's core purpose. Therefore, the omission of cash value from the illustration is aligned with regulatory practices aimed at consumer protection and clearer communication of life insurance products.