LLQP Life Insurance · Component 1.2 · 35% of the exam
A client holds a critical illness policy and asks whether it reduces her life insurance need. The agent should explain that:
- a critical illness benefit pays on diagnosis during life and does not replace a death benefit
- Ba critical illness policy makes life coverage unnecessary for any client under fifty
- Ccritical illness coverage automatically converts into life coverage at the insured's death
- Dthe two are interchangeable, so the critical illness amount can be deducted from the need
Correct answer: A) a critical illness benefit pays on diagnosis during life and does not replace a death benefit
Critical illness coverage addresses the financial impact of surviving a serious illness. It does nothing for the family if the client dies, so it does not reduce the amount of life insurance required.
Why the other options are wrong
- BAge does not make one type of coverage substitute for the other.
- CNo conversion into life coverage occurs unless a rider provides it.
- DThe two address different events and cannot be offset against each other.
Exam tip
Critical illness pays if you live; life insurance pays if you do not.
Common mistake
Netting critical illness coverage against the life insurance need.
What this tests
CISRO competency component 1.2 — 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.