LLQP Life Insurance · Component 1.2 · 35% of the exam
A client holds a universal life policy and has not reviewed it for years. Which risk is specific to that product and should be checked?
- AThe premium may have been silently raised by the insurer, since universal life contracts allow unilateral increases
- Investment performance below the illustrated rate may have left the fund unable to carry the cost of insurance, risking lapse
- CThe death benefit may have been reduced by the insurer to reflect the fund's poor performance over the years
- DUniversal life cannot lapse, so the only risk is that the fund has grown more slowly than the client expected
Correct answer: B) Investment performance below the illustrated rate may have left the fund unable to carry the cost of insurance, risking lapse
In UL, the monthly cost of insurance is deducted from the fund. If deposits and returns fall short of the original illustration, the fund can be exhausted and the policy lapse — often late in life when replacing it is expensive. Periodic in-force illustrations are the check.
Why the other options are wrong
- AUL premiums are not raised silently; the risk comes from fund performance.
- CThe insurer does not reduce the death benefit unilaterally; the risk is lapse.
- DUniversal life can lapse whenever the fund cannot cover the monthly charges.
Exam tip
Every UL review should include an in-force illustration: it shows whether the policy is still on track.
Common mistake
Treating a UL policy as self-sustaining once it is issued.
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.