A life insurance beneficiary elects to receive the death benefit in equal periodic payments for her lifetime, with the insurer guaranteeing payments for a minimum number of years so a secondary beneficiary receives any remaining guaranteed payments if she dies early. This settlement option is:

Life income with period certain

A life insurance policy contains the standard two-year suicide exclusion clause. The insured dies by suicide 13 months after the policy's issue date. Under the terms of this clause, the insurer will typically:

Deny the death benefit claim but refund all premiums paid to the beneficiary

A surgeon purchases an individual disability income policy with a 'true own-occupation' definition of total disability. He develops a hand tremor that prevents him from performing surgery, but he begins working full-time as a medical consultant, earning income comparable to his prior surgical income. Under this policy, he would:

Be eligible to receive his full disability benefit despite earning income in another occupation

A disability income policy uses an "own-occupation" definition of total disability. A surgeon loses the manual dexterity required to perform surgery but begins working as a medical school professor at comparable income. Under a true own-occupation definition, the surgeon would generally be considered:

Disabled and eligible for full benefits, because the insured cannot perform the material duties of their own specific occupation, regardless of other work performed

ChFC Insurance Planning Practice Questions

Official outline: The American College ChFC designation (courses)
Questions on this page: 7
Updated: Nov 3, 2026

Question 1, medium
A ChFC calculates a client's life insurance need by projecting his after-tax future earnings over his expected working lifetime and discounting them to present value. This approach is known as:
- A.The needs approach
- B.The debt-liquidation approach
- C.The capital retention approach
- D.The human life value approach
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Correct answer: D. The human life value approach
The human life value approach estimates the economic value of the insured's future earning capacity, discounted to present value, as the basis for the insurance need. The needs approach instead itemizes specific future expenses (income replacement, debts, education, final expenses) rather than capitalizing earnings.
- A. The needs approach sums specific dollar needs (income replacement, debt payoff, education, final expenses), rather than capitalizing projected future earnings.
- B. The debt-liquidation approach sizes coverage to pay off outstanding debts, unrelated to capitalizing the insured's projected career earnings.
- C. The capital retention (capitalization of income) approach preserves principal to generate ongoing income for survivors; it's a different methodology from projecting and discounting the insured's own future earnings.
- D. Correct. The human life value approach estimates life insurance need by projecting the insured's future after-tax earnings over their remaining working years and discounting that stream to present value.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026
Question 2, medium
A life insurance beneficiary elects to receive the death benefit in equal periodic payments for her lifetime, with the insurer guaranteeing payments for a minimum number of years so a secondary beneficiary receives any remaining guaranteed payments if she dies early. This settlement option is:
- A.Interest-only option
- B.Fixed-period option
- C.Life income with period certain
- D.Fixed-amount option
Show answer and explanationHide answer
Correct answer: C. Life income with period certain
'Life income with period certain' pays for the beneficiary's lifetime but guarantees a minimum payment period, with any remaining guaranteed payments going to a secondary beneficiary if the primary beneficiary dies early. Matching both features described in the stem.
- A. The interest-only option leaves the principal death benefit intact with the insurer paying only interest. It doesn't involve lifetime payments or a period-certain guarantee.
- B. The fixed-period option pays over a selected number of years regardless of how long the beneficiary lives; it isn't based on her life expectancy and has no lifetime income feature.
- C. Life income with period certain pays income for the beneficiary's lifetime while guaranteeing a minimum number of payments, with any remaining guaranteed payments going to a secondary beneficiary if she dies early. Matching both features described.
- D. The fixed-amount option pays a set dollar amount until the proceeds (plus interest) are exhausted, which is duration-of-funds-based rather than lifetime-based with a period-certain guarantee.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026
Question 3, easy
Which type of life insurance provides coverage for a specified period, generally builds no cash value, and typically offers the lowest initial premium for a given death benefit?
- A.Whole life
- B.Universal life
- C.Term life
- D.Variable universal life
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Correct answer: C. Term life
Term life insurance provides pure death-benefit protection for a defined period (e.g., 10, 20, or 30 years) with no cash value component, which is why its initial premiums are typically the lowest among life insurance products for a comparable death benefit.
- A. Whole life is permanent coverage with guaranteed cash value accumulation, not a specified-period product.
- B. Universal life is permanent, flexible-premium coverage with a cash value account, not a term product.
- C. Correct. Term life matches all three described features: temporary coverage, no cash value, low initial premium.
- D. Variable universal life is permanent coverage with a cash value account invested in subaccounts; it is not a term product.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026
Question 4, hard
A life insurance policy contains the standard two-year suicide exclusion clause. The insured dies by suicide 13 months after the policy's issue date. Under the terms of this clause, the insurer will typically:
- A.Pay the full death benefit as contracted, since suicide exclusions no longer apply after the first policy year
- B.Pay exactly 50% of the death benefit as a compromise settlement
- C.Deny the death benefit claim but refund all premiums paid to the beneficiary
- D.Deny the claim and retain all premiums paid, since suicide voids the contract entirely
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Correct answer: C. Deny the death benefit claim but refund all premiums paid to the beneficiary
The standard suicide clause excludes coverage for death by suicide within a specified period (typically two years) from issue. Because death occurred at month 13. Within that two-year window. The insurer denies the death benefit but is required to refund the premiums paid, since it never truly accepted the mortality risk for that cause of death during the exclusion period. This is a distinct provision from the incontestability clause, which addresses material misrepresentation on the application rather than cause of death.
- A. The two-year suicide exclusion is still in force at 13 months, so the death benefit is not paid as contracted.
- B. There is no standard 50% compromise payout under a suicide exclusion clause; the benefit is denied and premiums are returned.
- C. Because death by suicide occurred within the two-year exclusion period, the insurer denies the death benefit but, consistent with the contract's terms, refunds the premiums paid.
- D. Suicide within the exclusion period doesn't void the entire contract or let the insurer keep the premiums. Premiums are returned to the beneficiary.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026
Question 5, medium
A home's replacement cost is $400,000, and the policy carries $240,000 of dwelling coverage with an 80% coinsurance clause. A covered loss of $50,000 occurs (ignore the deductible). How much will the insurer pay?
- A.$50,000
- B.$30,000
- C.$37,500
- D.$40,000
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Correct answer: C. $37,500
An 80% coinsurance clause requires coverage of at least $320,000 (80% of $400,000). Carrying $240,000 satisfies only three-quarters of that requirement, so the insurer pays 240,000/320,000 of the $50,000 loss, or $37,500.
- A. Full payment would apply only if the insured carried at least the required 80% of replacement cost.
- B. This multiplies by 60%, the ratio of coverage to replacement cost, rather than the ratio of coverage carried to coverage required.
- C. The ratio of $240,000 to $320,000 is 0.75, and 0.75 times $50,000 is $37,500.
- D. This applies the 80% requirement percentage itself to the loss, which is not the formula.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026
Question 6, medium
A surgeon purchases an individual disability income policy with a 'true own-occupation' definition of total disability. He develops a hand tremor that prevents him from performing surgery, but he begins working full-time as a medical consultant, earning income comparable to his prior surgical income. Under this policy, he would:
- A.Not be eligible for benefits, because he is still working within the medical field
- B.Only receive benefits if his consulting income is less than 50% of his prior surgical income for at least a year
- C.Be eligible to receive his full disability benefit despite earning income in another occupation
- D.Be required to exhaust all available sick leave before benefits begin
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Correct answer: C. Be eligible to receive his full disability benefit despite earning income in another occupation
A true own-occupation disability definition pays full benefits if the insured cannot perform the material and substantial duties of his own specific occupation (here, surgery), even if he is able to work in a different occupation and earn income there. This is the most favorable and most expensive disability definition, often marketed to surgeons and other specialists precisely because of this feature.
- A. Incorrect; under a true own-occupation definition, working in a different occupation (even within the same broad field) does not disqualify the insured.
- B. Fabricates a percentage income offset test, held for at least a year, that does not apply to true own-occupation policies (that structure describes some residual/partial disability definitions, not this one).
- C. Correct. This is the hallmark feature of a true own-occupation policy.
- D. Sick leave exhaustion is not a requirement of individual disability income policy definitions of disability.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026
Question 7, medium
A disability income policy uses an "own-occupation" definition of total disability. A surgeon loses the manual dexterity required to perform surgery but begins working as a medical school professor at comparable income. Under a true own-occupation definition, the surgeon would generally be considered:
- A.Disabled and eligible for full benefits, because the insured cannot perform the material duties of their own specific occupation, regardless of other work performed
- B.Not disabled, because the insured is earning comparable income in another occupation and can therefore perform the duties of some gainful occupation
- C.Partially disabled, with benefits reduced proportionally by the income earned from the new teaching position under the base total disability definition
- D.Ineligible for benefits until reaching age 65, because own-occupation benefits are deferred until normal retirement age even after the disability definition is met and the elimination period has run
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Correct answer: A. Disabled and eligible for full benefits, because the insured cannot perform the material duties of their own specific occupation, regardless of other work performed
A true own-occupation definition pays full benefits if the insured cannot perform the material duties of their own specific occupation, even if they are able to work and earn income in a different occupation. This is what distinguishes own-occupation coverage from an 'any occupation' definition, which would deny or reduce benefits once the insured can perform any gainful work.
- A. Correct. Own-occupation coverage is precisely designed to pay full benefits in this scenario.
- B. This describes the outcome under an 'any occupation' definition, where the ability to perform other gainful work defeats the claim, not the own-occupation definition stated in the question.
- C. Proportional offset for other income is a feature of some residual/partial disability riders, not the base own-occupation total disability definition described here.
- D. Own-occupation benefits are payable once the definition of disability is met and the elimination period has run, not deferred to a specific age.
- Source: Exam outline: The American College ChFC designation (courses), accessed October 2026

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