Final answer:
It is true that producers cannot guarantee dividends in life insurance; dividends come from insurer's profits, which include investment income and surplus after paying claims and expenses.
Step-by-step explanation:
The statement is true: Producers must not state that dividends are guaranteed when selling life insurance policies. Instead, they should represent life insurance as an equitable distribution of the insurer's surplus or a return of overpaid premium. Life insurance dividends are typically sourced from the profits an insurance company generates, which include investment income earned on reserves, the funds leftover after paying out claims.
While some factors like administrative costs and groups with different risks can affect profitability, essential insurance principles dictate that a customer's payments over time should encompass their potential claims, the company's operational expenses, and allow for company profits. Insurers typically invest in safe, liquid assets to ensure funds are accessible for claims payouts. Dividends are paid out from the profits, which are not guaranteed and depend on the insurer's financial performance.