Illinois Life Producer State-designated Practice Exam

Stating that dividends are guaranteed is considered what?

1. Truthful representation

2. Misrepresentation

3. Full disclosure

4. Standard practice

The correct answer is: Misrepresentation

Stating that dividends are guaranteed is considered misrepresentation because, in the context of life insurance policies, dividends are not guaranteed. They are typically based on the company's performance and can vary from year to year. Misrepresentation occurs when a statement is made that could lead someone to form a false impression about an important aspect of an insurance policy. When selling insurance, it's essential to accurately portray the nature of dividends, indicating that while they may be paid, there is no assurance they will be provided in any given year. Providing correct information is crucial for maintaining trust and ensuring clients understand the terms and conditions of their policies.