State RegulationsTN specificDifficulty 2/5
A Tennessee producer is close to losing a life insurance sale when he offers to pay the applicant's initial premium out of his own pocket if she applies today. According to Tennessee Department of Commerce & Insurance disciplinary guidance, this offer is:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
T.C.A. § 56-8-104 forbids offering any rebate of premiums as an inducement to purchase, and Tennessee Department of Commerce & Insurance disciplinary orders treat payment of an applicant's premium by the producer as exactly that: a rebate of premium paid on the producer's behalf. Using the producer's own money and calling it generosity does not change the analysis, because the payment is valuable consideration outside the contract designed to induce the sale.
Why the other options are wrong
- A) The source of the funds is irrelevant; a premium payment made to induce the purchase is a rebate whether it comes from the producer, the insurer, or anyone else.
- B) No notice to the insurer cures the violation; the statute prohibits the offer itself, and advance written approval would not legalize it.
- D) The violation occurs when the inducement is offered to make the sale, not when the policy later lapses or stays in force.
Memory hook
Producer pays the first premium to land the sale? TDCI calls that a rebate.