LLQP Life Insurance · Component 2.1 · 30% of the exam
A client asks whether the death benefit of his universal life policy is guaranteed if his investments perform poorly. The accurate answer is:
- The face amount is payable while the policy stays in force; poor performance threatens the funding, not the promised amount
- BNo, the death benefit falls with the fund, since the beneficiary receives whatever the account is worth on the date of death
- COnly in the first year, after which the death benefit is adjusted annually to reflect the performance of the fund
- DYes, unconditionally, since the insurer guarantees the face amount whatever happens to the fund or the deposits
Correct answer: A) The face amount is payable while the policy stays in force; poor performance threatens the funding, not the promised amount
UL's death benefit is contractual, but its continuation depends on charges being paid. Poor returns mean higher required deposits; if the client stops paying, the policy lapses and the promise dies with it. Some UL contracts offer a level-cost guarantee that reduces this risk.
Why the other options are wrong
- BThe face amount does not shrink with the fund under a level death benefit option; the risk is lapse.
- CThe guarantee is not time-limited to one year.
- DThe benefit is conditional on the policy staying funded.
Exam tip
UL death benefit: guaranteed while funded. Explain what 'while funded' means.
Common mistake
Presenting UL's death benefit as unconditional.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.