Certified Financial Consultant (CFC) Practice Exam

Which of the following information will be stated in the consideration clause of a life insurance policy?

1. The policyholder's age

2. The amount of premium payment

3. The benefits covered by the policy

4. The terms of cancellation

The correct answer is: The amount of premium payment

The consideration clause is an essential component of a life insurance policy that specifies what each party to the contract must provide to initiate and maintain coverage. The correct answer highlights that the amount of premium payment is a key element of this clause. It establishes the policyholder’s commitment to make regular payments, which is the insurer's consideration for providing coverage. Without clearly stating the premium payment amount, there would be uncertainty about one of the fundamental aspects of the insurance contract, which is crucial for both the insurer's financial planning and the policyholder's obligations. The consideration clause ensures that both parties understand their responsibilities, with the insurer taking on the risk of coverage and the policyholder ensuring payment. Other elements, such as the policyholder's age, benefits covered, and terms of cancellation, while important to the overall policy, do not typically belong in the consideration clause. They are addressed elsewhere in the policy documents as they relate to coverage details and contract terms rather than the reciprocal obligations of consideration between the insurer and the insured.