Life License Qualification Program (LLQP) Practice Exam

Which Unfair Trade Practice involves an agent telling a prospective client that a policy's dividends are guaranteed?

1. Coercion

2. Fraud

3. Misrepresentation

4. Sliding

The correct answer is: Misrepresentation

The situation described involves an agent misleading a prospective client by stating that a policy's dividends are guaranteed when they may not actually be. This falls under the definition of misrepresentation, which occurs when false or misleading information is provided to a client about an insurance product. In this context, stating that dividends are guaranteed implies a level of security and reliability about the policy's performance that is not substantiated. In reality, dividends for most insurance policies are not guaranteed and depend on various factors such as the insurer's overall financial performance and management decisions. Therefore, this action can lead a client to make a decision based on incorrect information, which is the essence of misrepresentation. Recognizing misrepresentation is crucial in protecting consumers and ensuring they receive accurate and truthful information when selecting insurance products. Misleading statements can create a false sense of security and can harm not only the client but also the integrity of the insurance industry as a whole.