CLU Individual Life Insurance Planning 2

Question 1

A 45-year-old client wants permanent life insurance but is concerned about premium flexibility. Which policy type best addresses this need?

Accepted Answer

Universal life insurance

Answer

Universal life insurance allows flexible premium payments within policy guidelines while providing permanent death benefit coverage.

Question 2

What is the primary purpose of a policy's 'free look' provision?

Accepted Answer

To give policyowners a period to return a policy for a full refund

Answer

The free look provision gives new policyowners (typically 10-30 days) to review their policy and return it for a full premium refund if unsatisfied.

Question 3

When calculating the human life value approach to life insurance needs, which factor is NOT typically included?

Accepted Answer

Investment portfolio balance of the surviving spouse

Answer

The human life value approach focuses on the present value of future earnings minus personal consumption, not the surviving spouse's existing assets.

Question 4

A policy issued with a rated premium due to a health impairment means the applicant:

Accepted Answer

Pays a higher-than-standard premium to reflect increased risk

Answer

A rated (or substandard) policy is issued with an additional premium charge to compensate the insurer for the applicant's above-average mortality risk.

Question 5

Which settlement option provides the largest monthly income payment to a beneficiary?

Accepted Answer

Life income only (straight life annuity)

Answer

The life income only (straight life) option pays the highest monthly amount because payments cease at death, with no guaranteed minimum payout period.

CLU - Chartered Life Underwriter Practice Test

CLU - Chartered Life Underwriter Practice Test

CLU Individual Life Insurance Planning 2