CLU Chartered Life Underwriter Exam
Topic 1: Introduction to Life Insurance (18 Questions)
Q1. Which of the following best defines life insurance?
A) A savings account with guaranteed interest
B) A contract providing a death benefit in exchange for premiums
C) A loan that must be repaid with interest
D) An investment in stocks and bonds
Answer: B
Explanation: Life insurance is a contract where the insurer agrees to pay a designated beneficiary
a sum of money upon the death of the insured in exchange for premiums paid.
Q2. What is the primary purpose of life insurance in financial planning?
A) To generate short-term profits
B) To provide liquidity for daily expenses
C) To protect against financial loss upon death
D) To serve as a retirement investment only
Answer: C
Explanation: Life insurance primarily protects dependents from financial hardship when the
insured person dies.
Q3. Which historical development significantly advanced the modern life insurance
industry?
A) The invention of the printing press
B) The establishment of actuarial science
C) The development of the automobile
D) The discovery of electricity
Answer: B
Explanation: Actuarial science, which involves statistical analysis of risks, played a key role in
the development of modern life insurance.
Q4. Term life insurance is best characterized by which feature?
A) Lifetime coverage with fixed premiums
B) Coverage for a specific period with no cash value accumulation
C) Investment features with variable returns
D) Coverage that adjusts based on market performance
Answer: B
Explanation: Term life insurance provides coverage for a fixed period and does not build cash
value.
Q5. What distinguishes whole life insurance from term life insurance?
A) Lower premiums and no cash value
B) Permanent coverage with a savings component
,C) Coverage only for accidental death
D) Renewability every year without commitment
Answer: B
Explanation: Whole life insurance provides lifelong coverage and includes a cash value
component that accumulates over time.
Q6. Universal life insurance policies are best described as:
A) Policies with fixed premiums and benefits only
B) Policies that allow flexible premiums and death benefits
C) Short-term policies without any investment component
D) Policies exclusively for business owners
Answer: B
Explanation: Universal life insurance offers flexibility in premium payments and death benefit
amounts.
Q7. Which type of life insurance policy includes investment options that can vary in value?
A) Term life insurance
B) Whole life insurance
C) Variable life insurance
D) Universal life insurance
Answer: C
Explanation: Variable life insurance policies include investment options where the cash value
can fluctuate with market performance.
Q8. Indexed life insurance policies are linked to which of the following?
A) A fixed interest rate
B) The performance of a stock index
C) The insured’s age
D) The insurance company’s profits
Answer: B
Explanation: Indexed life insurance ties the cash value growth to the performance of a specific
market index.
Q9. The historical roots of life insurance can be traced back to:
A) The Industrial Revolution
B) Ancient Rome and China
C) The Renaissance period exclusively
D) The modern banking era
Answer: B
Explanation: Early forms of life insurance were practiced in ancient civilizations like Rome and
China.
Q10. Life insurance companies play an important societal role by:
A) Limiting access to financial products
B) Providing financial security and promoting savings
C) Only catering to wealthy individuals
,D) Primarily investing in speculative markets
Answer: B
Explanation: Life insurance companies offer financial protection and encourage disciplined
savings for future needs.
Q11. The regulatory environment for life insurance primarily aims to:
A) Promote unrestricted sales tactics
B) Protect consumers and ensure solvency of insurers
C) Increase the premiums arbitrarily
D) Eliminate competition among insurers
Answer: B
Explanation: Regulations are in place to safeguard policyholders and maintain the financial
health of insurance companies.
Q12. In life insurance, the term “insured” refers to:
A) The beneficiary of the policy
B) The person whose life is covered by the policy
C) The company issuing the policy
D) The agent selling the policy
Answer: B
Explanation: The insured is the individual whose life is covered, and upon whose death the
policy pays out.
Q13. Which factor has most contributed to the evolution of life insurance products over
time?
A) Decrease in population
B) Advances in medical and statistical sciences
C) Reduced life expectancy
D) Strictly fixed market conditions
Answer: B
Explanation: Improvements in medical knowledge and statistical analysis have allowed insurers
to design more tailored and reliable products.
Q14. Life insurance is considered an essential component of:
A) Only estate planning
B) Comprehensive financial planning
C) Real estate investment
D) Short-term speculative investments
Answer: B
Explanation: Life insurance is an integral part of financial planning, offering risk protection
alongside investment and estate planning benefits.
Q15. The death benefit in a life insurance policy is paid to:
A) The policyholder only
B) The insurance agent
C) The designated beneficiary
, D) The government
Answer: C
Explanation: The death benefit is paid to the beneficiary named in the policy upon the insured’s
death.
Q16. Which of the following is a key advantage of life insurance in financial planning?
A) It guarantees high returns similar to stocks
B) It eliminates the need for other investments
C) It provides a safety net for family members
D) It offers unlimited coverage without restrictions
Answer: C
Explanation: Life insurance ensures that the family or dependents have financial support in the
event of the policyholder’s death.
Q17. The history of life insurance demonstrates the importance of:
A) Rapid technological changes
B) Risk assessment and financial security
C) Short-term economic gains
D) Unregulated market practices
Answer: B
Explanation: Historical developments in life insurance underscore the critical role of risk
management and financial protection.
Q18. Which of the following best explains why life insurance premiums are based on risk
factors?
A) To ensure that everyone pays the same amount
B) To balance the insurer’s risk exposure across different individuals
C) To encourage only healthy individuals to purchase policies
D) To make policies unaffordable for high-risk individuals
Answer: B
Explanation: Premiums reflect the risk profile of the insured to ensure the insurer can cover
potential claims and maintain financial stability.
Topic 2: Life Insurance Policy Provisions, Options, and Riders (18 Questions)
Q19. The grace period in a life insurance policy is defined as:
A) The time allowed for a beneficiary to claim the death benefit
B) A period during which premiums may be paid after the due date without penalty
C) The duration before the policy becomes active
D) The time allowed for the insurer to investigate a claim
Answer: B
Explanation: The grace period allows policyholders extra time to pay premiums without losing
coverage.
Q20. What is the purpose of the incontestability clause in a life insurance policy?
A) To allow policy cancellation at any time
Topic 1: Introduction to Life Insurance (18 Questions)
Q1. Which of the following best defines life insurance?
A) A savings account with guaranteed interest
B) A contract providing a death benefit in exchange for premiums
C) A loan that must be repaid with interest
D) An investment in stocks and bonds
Answer: B
Explanation: Life insurance is a contract where the insurer agrees to pay a designated beneficiary
a sum of money upon the death of the insured in exchange for premiums paid.
Q2. What is the primary purpose of life insurance in financial planning?
A) To generate short-term profits
B) To provide liquidity for daily expenses
C) To protect against financial loss upon death
D) To serve as a retirement investment only
Answer: C
Explanation: Life insurance primarily protects dependents from financial hardship when the
insured person dies.
Q3. Which historical development significantly advanced the modern life insurance
industry?
A) The invention of the printing press
B) The establishment of actuarial science
C) The development of the automobile
D) The discovery of electricity
Answer: B
Explanation: Actuarial science, which involves statistical analysis of risks, played a key role in
the development of modern life insurance.
Q4. Term life insurance is best characterized by which feature?
A) Lifetime coverage with fixed premiums
B) Coverage for a specific period with no cash value accumulation
C) Investment features with variable returns
D) Coverage that adjusts based on market performance
Answer: B
Explanation: Term life insurance provides coverage for a fixed period and does not build cash
value.
Q5. What distinguishes whole life insurance from term life insurance?
A) Lower premiums and no cash value
B) Permanent coverage with a savings component
,C) Coverage only for accidental death
D) Renewability every year without commitment
Answer: B
Explanation: Whole life insurance provides lifelong coverage and includes a cash value
component that accumulates over time.
Q6. Universal life insurance policies are best described as:
A) Policies with fixed premiums and benefits only
B) Policies that allow flexible premiums and death benefits
C) Short-term policies without any investment component
D) Policies exclusively for business owners
Answer: B
Explanation: Universal life insurance offers flexibility in premium payments and death benefit
amounts.
Q7. Which type of life insurance policy includes investment options that can vary in value?
A) Term life insurance
B) Whole life insurance
C) Variable life insurance
D) Universal life insurance
Answer: C
Explanation: Variable life insurance policies include investment options where the cash value
can fluctuate with market performance.
Q8. Indexed life insurance policies are linked to which of the following?
A) A fixed interest rate
B) The performance of a stock index
C) The insured’s age
D) The insurance company’s profits
Answer: B
Explanation: Indexed life insurance ties the cash value growth to the performance of a specific
market index.
Q9. The historical roots of life insurance can be traced back to:
A) The Industrial Revolution
B) Ancient Rome and China
C) The Renaissance period exclusively
D) The modern banking era
Answer: B
Explanation: Early forms of life insurance were practiced in ancient civilizations like Rome and
China.
Q10. Life insurance companies play an important societal role by:
A) Limiting access to financial products
B) Providing financial security and promoting savings
C) Only catering to wealthy individuals
,D) Primarily investing in speculative markets
Answer: B
Explanation: Life insurance companies offer financial protection and encourage disciplined
savings for future needs.
Q11. The regulatory environment for life insurance primarily aims to:
A) Promote unrestricted sales tactics
B) Protect consumers and ensure solvency of insurers
C) Increase the premiums arbitrarily
D) Eliminate competition among insurers
Answer: B
Explanation: Regulations are in place to safeguard policyholders and maintain the financial
health of insurance companies.
Q12. In life insurance, the term “insured” refers to:
A) The beneficiary of the policy
B) The person whose life is covered by the policy
C) The company issuing the policy
D) The agent selling the policy
Answer: B
Explanation: The insured is the individual whose life is covered, and upon whose death the
policy pays out.
Q13. Which factor has most contributed to the evolution of life insurance products over
time?
A) Decrease in population
B) Advances in medical and statistical sciences
C) Reduced life expectancy
D) Strictly fixed market conditions
Answer: B
Explanation: Improvements in medical knowledge and statistical analysis have allowed insurers
to design more tailored and reliable products.
Q14. Life insurance is considered an essential component of:
A) Only estate planning
B) Comprehensive financial planning
C) Real estate investment
D) Short-term speculative investments
Answer: B
Explanation: Life insurance is an integral part of financial planning, offering risk protection
alongside investment and estate planning benefits.
Q15. The death benefit in a life insurance policy is paid to:
A) The policyholder only
B) The insurance agent
C) The designated beneficiary
, D) The government
Answer: C
Explanation: The death benefit is paid to the beneficiary named in the policy upon the insured’s
death.
Q16. Which of the following is a key advantage of life insurance in financial planning?
A) It guarantees high returns similar to stocks
B) It eliminates the need for other investments
C) It provides a safety net for family members
D) It offers unlimited coverage without restrictions
Answer: C
Explanation: Life insurance ensures that the family or dependents have financial support in the
event of the policyholder’s death.
Q17. The history of life insurance demonstrates the importance of:
A) Rapid technological changes
B) Risk assessment and financial security
C) Short-term economic gains
D) Unregulated market practices
Answer: B
Explanation: Historical developments in life insurance underscore the critical role of risk
management and financial protection.
Q18. Which of the following best explains why life insurance premiums are based on risk
factors?
A) To ensure that everyone pays the same amount
B) To balance the insurer’s risk exposure across different individuals
C) To encourage only healthy individuals to purchase policies
D) To make policies unaffordable for high-risk individuals
Answer: B
Explanation: Premiums reflect the risk profile of the insured to ensure the insurer can cover
potential claims and maintain financial stability.
Topic 2: Life Insurance Policy Provisions, Options, and Riders (18 Questions)
Q19. The grace period in a life insurance policy is defined as:
A) The time allowed for a beneficiary to claim the death benefit
B) A period during which premiums may be paid after the due date without penalty
C) The duration before the policy becomes active
D) The time allowed for the insurer to investigate a claim
Answer: B
Explanation: The grace period allows policyholders extra time to pay premiums without losing
coverage.
Q20. What is the purpose of the incontestability clause in a life insurance policy?
A) To allow policy cancellation at any time
