Certified Financial Consultant (CFC) Practice Exam

What aspect of annuities allows the owner to recover funds after death?

1. Investment growth

2. Cash value

3. Premium refunds

4. Interest accrual

The correct answer is: Cash value

The correct choice is based on the nature of cash value within certain types of annuities, particularly life insurance contracts or annuities that accumulate cash value over time. In these cases, if the annuity owner passes away, the accumulated cash value can be accessed by beneficiaries. This feature is crucial for individuals who want to ensure that some financial benefit is available to their heirs after their death, making cash value a significant aspect of certain annuity products. Investment growth refers to the increase in value of the money invested in the annuity over time, but it does not directly pertain to recovering funds after death. While it contributes to the overall value prior to death, it doesn't guarantee a payout posthumously. Premium refunds often relate to specific policies that return premiums to a beneficiary if the owner dies before certain conditions are met. While this can provide a form of recovery, it is not a characteristic of all annuities and is generally not the primary feature that guarantees fund recovery upon death. Interest accrual discusses the earnings on the principal balance of an annuity over time, contributing to its growth. However, like investment growth, it does not imply that beneficiaries will recover specific funds after the owner's death. Focusing on the cash value highlights