Certified Financial Consultant (CFC) Practice Exam

What effect do Accelerated Benefit provisions have on benefits paid to beneficiaries?

1. Increased benefits paid to beneficiary

2. No effect on benefits

3. Decreased benefits paid to beneficiary

4. Benefits only payable upon death

The correct answer is: Decreased benefits paid to beneficiary

Accelerated Benefit provisions allow policyholders to access a portion of their life insurance benefits while they are still alive, typically in the event of a terminal or critical illness. When a policyholder utilizes this provision, the amount withdrawn is deducted from the total death benefit available to beneficiaries. As a result, when the policyholder passes away, the overall benefit that beneficiaries receive is decreased because the benefits paid out during the insured's life will reduce the remaining balance allotted for death benefits. Therefore, the impact of Accelerated Benefit provisions on the benefits paid to beneficiaries is that it results in decreased benefits. This concept is critical for understanding how life insurance policies are structured and how provisions can influence the financial outcomes for both policyholders and their beneficiaries.