What must be stated in a life insurance policy regarding the insurer's financial condition?

The correct choice indicates that a life insurance policy must include a statement indicating if the finances are backed by reserves. This requirement is grounded in ensuring transparency and stability in the financial practices of insurance companies.

Reserves are critical for insurers as they represent the funds set aside to pay future claims. This information reassures policyholders that the insurance company has the financial means to fulfill its contractual obligations. Without this detail, policyholders might be left unaware of the insurer's capability to cover claims, which could lead to financial uncertainty in the event of a claim.

While information such as the insurer’s net worth, current stock price, or claims history may be relevant in evaluating the overall financial health of the company, state regulations specifically emphasize the necessity of disclosing the backing of reserves. This focus is to prioritize policyholder protections and promote trust in the insurance process by ensuring that companies maintain adequate assets for future liabilities.