LLQP Life Insurance · Component 3.2 · 25% of the exam
A business owner asks whether her company or she personally should own a new policy. The recommendation must weigh:
- Aonly which option produces the lower premium payment each month
- the purpose of the coverage, creditor exposure, cash flow and the tax consequences
- Conly whether the company currently has sufficient cash to pay premiums
- Donly the preference expressed by the insurer that will be issuing the contract in question
Correct answer: B) the purpose of the coverage, creditor exposure, cash flow and the tax consequences
Corporate ownership can use after-tax corporate dollars and credit the capital dividend account, but it exposes values to creditors and complicates a future sale. The decision needs accounting and legal input.
Why the other options are wrong
- AThe premium is identical; the difference lies in whose dollars pay it.
- CCash flow matters but is only one of several considerations.
- DInsurers accept either structure.
Exam tip
Ownership is a tax and creditor question, not a premium question.
Common mistake
Choosing corporate ownership purely for the cash flow advantage.
What this tests
CISRO competency component 3.2 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Life Insurance module. Written against the published curriculum.
More from component 3
- At policy delivery, the agent should obtain:
- The effective date of a life insurance policy is generally:
- A client's application is approved but he has not paid the first premium when the policy is delivered. The agent should:
- A pre-authorized debit form is part of implementation because:
- During implementation, the agent learns the client wants the policy owned by her corporation instead of personally, as first applied for. The correct step is:
- Which of the following is a legitimate reason an insurer might refuse to issue a policy even after favourable underwriting?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.