LLQP Life Insurance · Component 1.1 · 35% of the exam
A client has a child with a disability savings plan and asks how it affects his own coverage need. The agent should note that:
- Acontributions to the plan can be made from the life insurance proceeds free of any limit
- Bthe plan must be collapsed on the client's death and the proceeds included in his income
- the plan is a resource, but the child's lifetime support may still exceed what it provides
- Dthe plan removes the need for coverage because the child's future is already funded
Correct answer: C) the plan is a resource, but the child's lifetime support may still exceed what it provides
A disability savings plan is valuable but usually only part of the answer for a dependant who will never be self-supporting. Coverage may be needed to fund the shortfall, often paid to a properly drafted trust.
Why the other options are wrong
- AContributions remain subject to the plan's own lifetime limit.
- BThe plan is not collapsed and taxed to the client on death.
- DThe plan rarely covers a lifetime of support on its own.
Exam tip
A disability savings plan reduces but seldom removes a lifetime support need.
Common mistake
Treating a registered plan as a complete answer for a dependent child.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.