Certified Financial Consultant (CFC) Practice Exam

In what scenario would a life insurance policy's guaranteed insurability rider be beneficial?

1. When the policyholder has a change in occupation

2. When the policyholder wants to increase coverage without additional health questions

3. When the policyholder decides to reduce coverage

4. When the policyholder is over age 60

The correct answer is: When the policyholder wants to increase coverage without additional health questions

The guaranteed insurability rider in a life insurance policy is particularly advantageous in situations when the policyholder wants to increase insurance coverage without needing to undergo additional health assessments. This rider allows individuals to secure additional coverage at predetermined times or under specified conditions, irrespective of their health status at that time. This feature is especially valuable because, as policyholders age or if their health status changes, obtaining new coverage could become more difficult or expensive. The rider ensures that the individual can maintain or enhance their life insurance coverage although they may have developed health issues that would otherwise affect their insurability. In contrast, scenarios like a change in occupation or deciding to reduce coverage do not inherently benefit from the guaranteed insurability rider as they do not focus on expanding coverage when health conditions may make it challenging to obtain new insurance. Additionally, being over age 60 does not automatically align with the benefits of this rider unless linked to a desire for increased coverage amidst potential health concerns.