What is a crucial reason for customers to fully understand the sales proposal for variable life policies?

What is a crucial reason for customers to fully understand the sales proposal for variable life policies?

• A. To better understand insurance regulations
• B. To accurately predict guaranteed returns
• C. Because they bear the impacts of investment changes
• D. To identify potential agents' benefits

Answer: (C)

Understanding the sales proposal for variable life policies is crucial because customers are directly affected by the investment performance of the policy. Variable life insurance combines life coverage with investment options, allowing policyholders to allocate a portion of their premiums to investment accounts that can fluctuate in value. Therefore, policyholders bear the risks and rewards of these investment changes; their cash value and death benefit may increase or decrease based on market performance. It is important for customers to grasp this concept to make informed decisions about their investment, manage their expectations regarding returns, and understand the implications of market volatility on their policy. This awareness enables them to align their financial goals with their insurance strategy effectively.

Understanding the sales proposal for variable life policies is crucial because customers are directly affected by the investment performance of the policy. Variable life insurance combines life coverage with investment options, allowing policyholders to allocate a portion of their premiums to investment accounts that can fluctuate in value. Therefore, policyholders bear the risks and rewards of these investment changes; their cash value and death benefit may increase or decrease based on market performance. It is important for customers to grasp this concept to make informed decisions about their investment, manage their expectations regarding returns, and understand the implications of market volatility on their policy. This awareness enables them to align their financial goals with their insurance strategy effectively.