Certified Financial Planner (CFP) Exam 2025 – 400 Free Practice Questions to Pass the Exam

In the context of a financial planning practice, general liability insurance is crucial as it protects the business from claims resulting from injuries and damages that may occur as a part of its operations. This type of insurance covers legal costs and damages for which the business could be found liable, ensuring that John is financially safeguarded against unforeseen events, such as a client slipping and falling in his office, or allegations of negligence in the advice given.

For financial planners, the potential for lawsuits, whether from clients or third parties, is a significant risk. Without adequate coverage, a single claim could jeopardize the entire business. Additionally, clients are often more comfortable working with a financial planner who carries general liability insurance, as it reflects a level of professionalism and commitment to risk management.

While health insurance, life insurance, and property insurance are important for individuals and businesses, they do not specifically address the unique liabilities faced by financial planning practices. Health insurance is typically a personal coverage, life insurance serves to protect dependents, and property insurance safeguards physical assets, but none of these focus on liability in a business context. Therefore, for John’s financial planning practice, general liability insurance is the most relevant and beneficial type of coverage to consider.