For life insurance policies, what must producers disclose to clients?

Producers are required to disclose the risks associated with life insurance policies to their clients because this is essential for informed decision-making. Clients must understand the potential risks, limitations, and exclusions of the policy to assess whether it meets their financial needs and expectations. Transparency regarding these risks helps ensure that the client is fully aware of what they are purchasing, including any conditions that may affect their coverage or benefits.

Disclosing the highest commissions, while relevant to understanding producer incentives, does not provide the client with vital information about the policy itself. Information about an insurance company’s profit margins is more relevant to assessing the overall financial health of the company rather than the specifics of a policy. Lastly, background checks of the company might pertain to its legitimacy and reputation, but they do not directly inform the client about the specific risks associated with the policy they are considering. Thus, the emphasis on informing clients about risks aligns with promoting transparency and fostering trust in the insurance purchasing process.