Advocis CLU Sample Questions & Practice Test

Chartered Life Underwriter (CLU) preparation should connect client facts to insurance, tax, estate, business-owner, retirement, and wealth-transfer consequences. The strongest answers usually balance client goals, liquidity, risk, beneficiary planning, and documentation.

Sample Exam Questions

Try these 12 original CLU sample questions. They are not official Advocis or IAFE questions.

Question 1

Topic: Estate liquidity

A widowed business owner has most wealth tied up in private company shares and wants children to avoid a forced sale at death. What planning issue is most direct?

• A. Reducing all insurance coverage
• B. Estate liquidity for tax, debts, and equalization needs
• C. Ignoring the business because it is private
• D. Replacing the will with a mutual fund statement

Best answer: B

Explanation: CLU-style planning often focuses on liquidity and transfer consequences. Insurance or other liquidity tools may help, but the need must be analyzed first.

Question 2

Topic: Beneficiary planning

Why should beneficiary designations be reviewed after separation or divorce?

• A. Divorce automatically updates every contract
• B. Designations are never relevant
• C. Insurance proceeds always flow through the estate
• D. Family status changes can create unintended proceeds, estate, and conflict consequences

Best answer: D

Explanation: Beneficiary designations can control proceeds outside the will. Life changes should trigger review with appropriate legal and tax advice.

Question 3

Topic: Business insurance

Two shareholders rely on each other to operate the company. What is a common reason for buy-sell insurance?

• A. To fund ownership transfer if a shareholder dies or becomes disabled, depending on the arrangement
• B. To guarantee company profits
• C. To replace shareholder agreements
• D. To eliminate the need for valuation

Best answer: A

Explanation: Buy-sell funding can support continuity and ownership transfer. It does not replace legal agreements or valuation work.

Question 4

Topic: Client priorities

A client wants the lowest premium but also permanent estate liquidity. What should the advisor clarify?

• A. That permanent needs should always use term insurance
• B. That all policies are identical
• C. The trade-off between cost, duration, guarantees, and planning objective
• D. That premiums are the only decision factor

Best answer: C

Explanation: CLU judgment requires matching product features to the need. Lowest initial cost may conflict with permanent coverage objectives.

Question 5

Topic: Tax awareness

Why should tax consequences be considered in estate and insurance planning?

• A. Insurance planning eliminates all tax issues
• B. Taxes can affect liquidity needs and net value transferred
• C. Taxes apply only to corporations
• D. Advisors should ignore tax because clients can ask later

Best answer: B

Explanation: Tax exposure can drive liquidity needs and planning design. Advisors should recognize the issue and coordinate with tax professionals when needed.

Question 6

Topic: Needs analysis

Which item belongs in a survivor needs analysis?

• A. The insurer’s logo
• B. Only the client’s preferred premium
• C. The agent’s sales target
• D. Debts, income replacement, education goals, final expenses, and available resources

Best answer: D

Explanation: Needs analysis compares obligations and goals against existing resources. Premium affordability matters but should not replace the analysis.

Question 7

Topic: Policy review

A policy purchased 20 years ago no longer matches the client’s family and business structure. What is the best action?

• A. Review objectives, ownership, beneficiaries, coverage amount, and tax or estate implications before changing anything
• B. Cancel immediately
• C. Ignore the mismatch
• D. Change beneficiaries without client authorization

Best answer: A

Explanation: Existing policies can have valuable features and consequences. Review before recommending changes.

Question 8

Topic: Risk management

A high-income professional has large debt, dependent children, and no disability coverage. What is the most direct risk-management concern?

• A. Debt automatically disappears on disability
• B. Only investment returns matter
• C. Loss of earning capacity could undermine the family’s plan
• D. Disability risk is irrelevant if income is high

Best answer: C

Explanation: Disability can threaten income, debt service, and family goals. CLU candidates should recognize human capital risk.

Question 9

Topic: Estate equalization

One child will inherit the family business and another will not. Why might insurance be considered?

• A. It makes all family disputes impossible
• B. It may help equalize inheritances without forcing a sale of business assets
• C. It replaces legal advice
• D. It eliminates the need to value the business

Best answer: B

Explanation: Insurance can provide liquidity for equalization, but it must fit the broader estate plan.

Question 10

Topic: Corporate-owned insurance

What should be reviewed before recommending corporate-owned life insurance?

• A. Whether the corporation likes the insurer’s website
• B. Only the lowest premium
• C. Only the insured’s age
• D. Ownership, beneficiary, tax, creditor, shareholder, and business-purpose implications

Best answer: D

Explanation: Corporate-owned insurance can be useful but requires careful review of tax and business consequences.

Question 11

Topic: Advisor conduct

A client asks the advisor to complete medical answers inaccurately to speed underwriting. What should the advisor do?

• A. Refuse and explain the need for accurate disclosure
• B. Complete the form as requested
• C. Leave answers blank intentionally
• D. Tell the client inaccuracies never matter

Best answer: A

Explanation: Accurate disclosure is essential. Misrepresentation can harm coverage and creates conduct risk.

Question 12

Topic: Coordination

Why should insurance, estate, and investment planning be coordinated?

• A. Investment returns alone determine all planning decisions
• B. Coordination is never useful
• C. A recommendation in one area can affect liquidity, tax, risk, beneficiaries, and family outcomes
• D. Insurance automatically solves every estate issue

Best answer: C

Explanation: CLU-level reasoning is integrated. Insurance decisions can affect estate, tax, family, and business objectives.

Related pages

• Advocis CHS
• LLQP
• FP Canada CFP MCQ