Certified Financial Consultant (CFC) Practice Exam

Which document outlines the benefits, limitations, and provisions of an insurance policy?

1. Endorsement

2. Policy summary

3. Insurance contract

4. Application form

The correct answer is: Insurance contract

The correct choice is the insurance contract, as this document serves as the foundational agreement between the insurer and the insured. It outlines the terms of coverage, detailing the benefits provided by the policy, the limitations of those benefits, and any specific provisions that govern the agreement. The insurance contract specifies the circumstances under which benefits may be claimed, any exclusions that may apply, and the obligations of both parties. This legal document is crucial because it establishes the rights and responsibilities of the insurer towards the policyholder, as well as the specific protections offered under the policy. The other options have different roles: an endorsement modifies the original policy; a policy summary is a simplified explanation or overview of the insurance policy but does not hold the same legal weight as the contract itself; and the application form initiates the process of obtaining insurance but does not detail its benefits or provisions. Thus, understanding the detailed and binding nature of the insurance contract is essential for both the provider and the recipient of insurance.