WMS Risk Management and Insurance Solutions 2

Question 1

A client owns a business and wants to protect against the financial impact of a key employee's death. Which insurance solution is most appropriate?

Accepted Answer

Key person life insurance

Answer

Key person life insurance reimburses the business for lost revenue and costs to find a replacement when a critical employee dies.

Question 2

Which of the following best describes 'pure risk' in the context of wealth management?

Accepted Answer

Risk that involves only the chance of loss or no loss

Answer

Pure risk involves only two outcomes—loss or no loss—and is the type of risk typically covered by insurance.

Question 3

A 55-year-old client is concerned about outliving retirement assets. Which insurance product directly addresses longevity risk?

Accepted Answer

Deferred income annuity (DIA)

Answer

A deferred income annuity provides guaranteed lifetime income beginning at a future date, directly mitigating longevity risk.

Question 4

Which type of life insurance policy allows the policyholder to adjust the death benefit and premium payments within certain limits?

Accepted Answer

Universal life insurance

Answer

Universal life insurance offers flexible premiums and adjustable death benefits, distinguishing it from fixed whole life policies.

Question 5

An umbrella liability policy is best described as:

Accepted Answer

A policy that provides excess coverage above underlying policy limits

Answer

Umbrella liability policies activate after underlying auto, homeowners, or other liability limits are exhausted, providing additional protection.

(WMS) Wealth Management Specialist Certification Practice Test