CFC Insurance and Risk Management 1

Question 1

Which type of life insurance provides permanent coverage and builds cash value through a separate investment account?

Accepted Answer

Variable universal life (VUL) insurance

Answer

Variable universal life insurance combines permanent coverage with investment subaccounts, allowing policyholders to allocate cash value to equity or bond funds.

Question 2

A disability income policy with an 'own-occupation' definition covers a claimant who:

Accepted Answer

Cannot perform the specific duties of their own occupation

Answer

An own-occupation definition pays benefits if the insured cannot perform the duties of their specific occupation, even if they can work in another field.

Question 3

Which long-term care insurance (LTCI) benefit trigger requires that a claimant be unable to perform a specified number of Activities of Daily Living (ADLs)?

Accepted Answer

2 out of 6 ADLs

Answer

Most LTCI policies and Medicaid require inability to perform at least 2 of 6 standard ADLs (bathing, dressing, eating, transferring, toileting, continence) to trigger benefits.

Question 4

An 'umbrella' liability insurance policy primarily provides:

Accepted Answer

Excess liability coverage above underlying home and auto policy limits

Answer

Personal umbrella policies extend liability coverage beyond the limits of underlying homeowners and auto policies, protecting against large judgments or settlements.

Question 5

Which annuity type guarantees a fixed income payment for life regardless of how long the annuitant lives?

Accepted Answer

Life-only (straight life) annuity

Answer

A life-only annuity provides guaranteed income payments for the annuitant's lifetime, with payments ceasing at death — maximizing income but providing no death benefit.

CFC - Certified Financial Consultant Practice Test

CFC - Certified Financial Consultant Practice Test

CFC Insurance and Risk Management 1