If dividend options are offered on a whole life insurance policy, what statement must the policy contain?

The inclusion of a statement that "dividends are not guaranteed" is important because it reflects the nature of how dividends function in whole life insurance policies. While these policies may pay dividends, which are excess premiums returned to policyholders based on the insurer's financial performance, they are not assured. Dividends can fluctuate from year to year and may be influenced by various factors such as the insurer’s investment earnings, mortality rates, and overall operational efficiency.

This is crucial for policyholders to understand, as it sets realistic expectations about potential benefits from their policy. By making it clear that dividends are not guaranteed, the insurer ensures that the policyholder is aware that what they may receive in terms of dividends each year can vary and may not be relied upon as a fixed benefit. Such transparency is essential for responsible financial planning and helps protect consumers from misconceptions about the predictability and reliability of the dividends associated with their insurance policy.