Chartered Life Underwriter (CLU)
Examination Practice Exam 2026 | 100
Questions & Answers with Detailed
Rationales | Complete CLU Exam Prep &
Study Guide
1. Which principle requires an insurance applicant to disclose material facts
that could affect underwriting?
A. Indemnity
B. Utmost good faith
C. Subrogation
D. Contribution
Answer: B. Utmost good faith
Rationale: The principle of utmost good faith requires the parties to an
insurance contract to disclose material information and deal honestly with one
another.
2. What is the primary purpose of life insurance?
A. To provide investment returns only
B. To protect against premature death and financial loss
,C. To eliminate all taxes
D. To guarantee retirement income
Answer: B. To protect against premature death and financial loss
Rationale: Life insurance primarily provides financial protection against the
economic consequences of an insured person's death.
3. Which factor is generally most important in determining the amount of life
insurance needed?
A. Favorite investment
B. Financial obligations and income replacement needs
C. Number of bank accounts
D. Preferred insurance company
Answer: B. Financial obligations and income replacement needs
Rationale: Life insurance needs analysis considers income replacement, debts,
education costs, final expenses, and other financial obligations.
4. What does insurable interest generally mean in life insurance?
A. The beneficiary must be a relative
B. The policy owner would suffer a financial or emotional loss from the insured's
death
C. The insurer must earn interest
D. The insured must own property
Answer: B. The policy owner would suffer a financial or emotional loss from the
insured's death
Rationale: Insurable interest establishes a legitimate relationship or financial
interest that supports the insurance contract.
5. Which type of life insurance generally provides protection for a specified
period?
,A. Whole life
B. Universal life
C. Term life
D. Variable life
Answer: C. Term life
Rationale: Term insurance provides life insurance protection for a defined
period, such as 10, 20, or 30 years.
6. Which characteristic is associated with traditional whole life insurance?
A. No death benefit
B. Permanent coverage with cash value accumulation
C. Coverage only during employment
D. No fixed premiums
Answer: B. Permanent coverage with cash value accumulation
Rationale: Whole life generally provides permanent protection, level premiums,
and a cash value component.
7. Universal life insurance is distinguished primarily by its:
A. Fixed maturity date
B. Flexible premiums and adjustable policy features
C. Lack of death benefit
D. Requirement for employer sponsorship
Answer: B. Flexible premiums and adjustable policy features
Rationale: Universal life generally allows flexibility in premium payments and
death-benefit arrangements, subject to policy requirements.
8. Which policy type allows policy values to be invested in separate accounts
selected from available investment options?
, A. Term life
B. Variable life
C. Traditional whole life
D. Credit life
Answer: B. Variable life
Rationale: Variable life policies generally place cash values in separate accounts
whose investment performance affects policy values.
9. What is the main purpose of underwriting?
A. To determine whether an applicant presents an acceptable risk
B. To calculate income taxes
C. To select beneficiaries
D. To determine estate ownership
Answer: A. To determine whether an applicant presents an acceptable risk
Rationale: Underwriting evaluates mortality risk and other relevant factors to
determine whether and on what terms coverage should be issued.
10.Which underwriting factor is directly related to mortality risk?
A. Favorite color
B. Medical history
C. Preferred beneficiary's occupation
D. Home décor
Answer: B. Medical history
Rationale: Medical history can provide significant information about an
applicant's expected mortality and insurability.
11.What is adverse selection?
A. Selecting a beneficiary after death
B. The tendency of higher-risk individuals to seek more insurance coverage
Examination Practice Exam 2026 | 100
Questions & Answers with Detailed
Rationales | Complete CLU Exam Prep &
Study Guide
1. Which principle requires an insurance applicant to disclose material facts
that could affect underwriting?
A. Indemnity
B. Utmost good faith
C. Subrogation
D. Contribution
Answer: B. Utmost good faith
Rationale: The principle of utmost good faith requires the parties to an
insurance contract to disclose material information and deal honestly with one
another.
2. What is the primary purpose of life insurance?
A. To provide investment returns only
B. To protect against premature death and financial loss
,C. To eliminate all taxes
D. To guarantee retirement income
Answer: B. To protect against premature death and financial loss
Rationale: Life insurance primarily provides financial protection against the
economic consequences of an insured person's death.
3. Which factor is generally most important in determining the amount of life
insurance needed?
A. Favorite investment
B. Financial obligations and income replacement needs
C. Number of bank accounts
D. Preferred insurance company
Answer: B. Financial obligations and income replacement needs
Rationale: Life insurance needs analysis considers income replacement, debts,
education costs, final expenses, and other financial obligations.
4. What does insurable interest generally mean in life insurance?
A. The beneficiary must be a relative
B. The policy owner would suffer a financial or emotional loss from the insured's
death
C. The insurer must earn interest
D. The insured must own property
Answer: B. The policy owner would suffer a financial or emotional loss from the
insured's death
Rationale: Insurable interest establishes a legitimate relationship or financial
interest that supports the insurance contract.
5. Which type of life insurance generally provides protection for a specified
period?
,A. Whole life
B. Universal life
C. Term life
D. Variable life
Answer: C. Term life
Rationale: Term insurance provides life insurance protection for a defined
period, such as 10, 20, or 30 years.
6. Which characteristic is associated with traditional whole life insurance?
A. No death benefit
B. Permanent coverage with cash value accumulation
C. Coverage only during employment
D. No fixed premiums
Answer: B. Permanent coverage with cash value accumulation
Rationale: Whole life generally provides permanent protection, level premiums,
and a cash value component.
7. Universal life insurance is distinguished primarily by its:
A. Fixed maturity date
B. Flexible premiums and adjustable policy features
C. Lack of death benefit
D. Requirement for employer sponsorship
Answer: B. Flexible premiums and adjustable policy features
Rationale: Universal life generally allows flexibility in premium payments and
death-benefit arrangements, subject to policy requirements.
8. Which policy type allows policy values to be invested in separate accounts
selected from available investment options?
, A. Term life
B. Variable life
C. Traditional whole life
D. Credit life
Answer: B. Variable life
Rationale: Variable life policies generally place cash values in separate accounts
whose investment performance affects policy values.
9. What is the main purpose of underwriting?
A. To determine whether an applicant presents an acceptable risk
B. To calculate income taxes
C. To select beneficiaries
D. To determine estate ownership
Answer: A. To determine whether an applicant presents an acceptable risk
Rationale: Underwriting evaluates mortality risk and other relevant factors to
determine whether and on what terms coverage should be issued.
10.Which underwriting factor is directly related to mortality risk?
A. Favorite color
B. Medical history
C. Preferred beneficiary's occupation
D. Home décor
Answer: B. Medical history
Rationale: Medical history can provide significant information about an
applicant's expected mortality and insurability.
11.What is adverse selection?
A. Selecting a beneficiary after death
B. The tendency of higher-risk individuals to seek more insurance coverage
