Under California law, when an accelerated death benefit is available for a chronic illness, the insurer must disclose that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California requires clear disclosure of the difference between an accelerated death benefit for chronic illness and a long-term care insurance policy, under CIC §10295 et seq. and §10234.93. The ADB may be structured to pay a lump sum under §10295.1 or as periodic payments under §10295.12, and the insured must understand that it is not an LTC policy with LTC's consumer protections and features. The disclosure prevents buyers from confusing the products. ADB does not replace Medicare, is not automatically tax-free in all cases, and does not waive premiums.
Why the other options are wrong
- B) ADB is a life insurance feature; it has nothing to do with replacing Medicare coverage.
- C) Tax treatment of ADB depends on how it is paid and the insured's circumstances; it is not guaranteed tax-free.
- D) Premium waiver is a separate rider; the ADB does not permanently waive the policy's premiums.
Memory hook
Chronic-illness ADB is not LTC insurance — California makes the difference loud and clear, lump sum or periodic.