Advanced Diploma of Financial Planning (ADFP) Practice Test

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Prepare for the Advanced Diploma of Financial Planning Exam with comprehensive quizzes on finance principles, investment strategies, and risk management. Improve your knowledge and excel in your financial planning career!

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 does disability income insurance provide?

A one-time lump-sum payment
A regular income while unable to work
Full retirement benefits after a fixed period
Payment only for temporary injuries

The correct answer is: A regular income while unable to work

Disability income insurance is designed to provide individuals with a continuous source of income if they are unable to work due to an illness or injury. This type of insurance replaces a portion of the lost wages, which allows recipients to meet their financial obligations and maintain their living standards during the period of disability. The focus on providing a regular income highlights the importance of financial stability for those who are temporarily or permanently unable to earn a living due to their condition. Each policy may have specific terms regarding the duration of coverage and the percentage of income replaced, but the core function remains the same: to safeguard against the loss of income due to a disabling event. Other options do not align with the primary function of disability income insurance. A lump-sum payment does not cater to ongoing financial needs during a period of incapacity. Full retirement benefits are unrelated to disability and typically do not begin until a person reaches retirement age. Finally, limiting payments only to temporary injuries does not reflect the comprehensive nature of disability income insurance, which can encompass a wide range of qualifying conditions, both temporary and permanent.