Certified Financial Consultant (CFC) Practice Exam

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Prepare for the Certified Financial Consultant Exam. Enhance your understanding with detailed questions, hints, and explanations. Boost your confidence for the CFC test!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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What is the best reason to purchase life insurance rather than annuities?

To fund retirement
To create an estate
To ensure income during old age
To receive regular cash flow

The correct answer is: To create an estate

Purchasing life insurance primarily serves the purpose of creating an estate, which is the best reason in this context. Life insurance provides a death benefit that can be passed on to beneficiaries, effectively allowing the policyholder to leave a financial legacy or estate after their passing. This benefit can help cover debts, final expenses, or provide a financial cushion for loved ones, making it a distinctive tool for estate planning. In contrast, while annuities focus mainly on providing income, especially during retirement, they do not create an estate in the same way life insurance does. Annuities are designed to ensure a steady cash flow over time, which is crucial for retirees, but they may not provide a significant financial benefit to heirs upon the annuitant’s death, depending on the contract terms. Therefore, choosing life insurance to create an estate highlights its role in financial planning, particularly in preserving wealth and supporting beneficiaries.