Certified Financial Consultant (CFC) Practice Exam

When is restoration of benefits most beneficial to the insured?

1. When they suffer a minor loss

2. When they have not used the policy in the last year

3. When they suffer a large loss

4. When they reach retirement age

The correct answer is: When they suffer a large loss

The restoration of benefits is especially advantageous to the insured when they experience a large loss. This is because a significant loss can severely impact their financial stability and ability to recover without adequate insurance coverage. In such scenarios, restoring benefits ensures that the insured can receive the full value of their policy again, allowing for a proper recovery and mitigation of the financial impact of the loss. If the restoration of benefits is applied after a substantial claim, it provides critical financial support to rebuild, replace assets, or recover losses that may encompass significant expenditures. This feature of insurance policies is designed to give policyholders a safety net in the event of significant, unexpected losses. In contrast, if the loss is minor, the restoration of benefits may not be necessary, as the financial impact is manageable without additional payout from the insurance. For those who have not used their policy in the last year, the restoration might not be relevant if no claims were made, and thus the potential benefits of restoring coverage do not apply. Lastly, reaching retirement age does not inherently relate to restoration of benefits since it pertains more to the timing in one’s life rather than the severity of any incurred losses.