What is the importance of a sales illustration in a variable annuity sale?

• A. It shows potential values under certain assumptions but is not guaranteed; it must disclose guaranteed versus non-guaranteed amounts and the effect of fees and rates.
• B. It guarantees future performance.
• C. It is optional and regulated differently by jurisdictions.
• D. It is used to determine the contract's tax treatment.

Answer: (A)

Sales illustrations in a variable annuity are used to show potential outcomes under a defined set of assumptions, including presumed investment returns and fees. They are not guarantees of future results; actual values can be higher or lower because market performance and costs will vary. The illustration must clearly separate guaranteed amounts from non-guaranteed amounts and show how fees, surrender charges, and rate assumptions affect projections. This helps clients understand potential outcomes, compare products, and grasp the impact of costs and guarantees before making a decision. It’s not optional and is regulated, with different jurisdictions having different formatting and disclosure rules, but the core purpose is to inform about possible results rather than promise them.