LLQP Accident & Sickness · Component 3.1 · 25% of the exam
An applicant is a professional with a high income but heavy business debt. In financial underwriting the debt:
- Is reviewed, since heavy personal borrowing can indicate over-insurance relative to sustainable income
- BDisqualifies the applicant, since indebted applicants present an unacceptable moral hazard
- CIncreases the benefit the insurer will issue, since the debt must be serviced during a disability
- DIs irrelevant, since disability benefits are based on income rather than on the applicant's balance sheet
Correct answer: A) Is reviewed, since heavy personal borrowing can indicate over-insurance relative to sustainable income
Underwriters look at the whole financial picture, and a benefit that exceeds what the applicant's sustainable earnings support is exactly what the issue limit is designed to prevent.
Why the other options are wrong
- BIndebted applicants are insured routinely within the normal limits.
- CDebt service does not enlarge the amount an insurer will issue.
- DFinancial underwriting considers more than the income figure alone.
Exam tip
Financial underwriting looks at the whole picture, not the income line.
Common mistake
Justifying a larger benefit by pointing to the client's debts.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Accident & Sickness module. Written against the published curriculum.
More from component 3
- An underwriter assigns a disability applicant to occupational class 2 rather than class 4. The practical effect is that:
- A disability applicant discloses a back condition that resolved four years ago with no recurrence. The likely underwriting outcome is:
- Financial underwriting for an individual disability application exists to:
- A critical illness applicant's mother and sister both had breast cancer before fifty. The underwriter is likely to:
- An applicant for long-term care coverage is seventy-two. The insurer is most likely to require:
- Group long-term disability coverage within the non-evidence maximum is issued without individual medical questions because:
Practice the whole Accident & Sickness module
Timed sets weighted like the exam, and review of every question you miss. Free to start.