If dividends are discussed during the sales process, what must be stated?

In the context of life and health insurance, it is important for agents to clearly communicate the nature of dividends to potential policyholders. Dividends are typically considered a return of excess premium or a distribution of surplus from mutual insurance companies, and they are not guaranteed. This means that while a policyholder may receive dividends in some years based on the company's performance, there is no assurance that dividends will be paid every year or that they will remain at a certain level.

Stating that dividends are not guaranteed is crucial because it sets realistic expectations for the policyholder. It prevents misunderstandings about the financial benefits that might be anticipated from the policy, ensuring that consumers are making informed decisions based on the potential variability of dividends. By clearly outlining this risk, agents adhere to ethical sales practices and help maintain transparency in the sales process.