LLQP Life Insurance · Component 1.1 · 35% of the exam
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:
- AInflation eroding the value of the family's savings while the children are dependent
- Loss of the household's income if the client dies before the children are independent
- CThe client's own retirement income falling short if the client lives a long life
- DThe cost of childcare and household help if the stay-at-home spouse dies first
Correct answer: B) Loss of the household's income if the client dies before the children are independent
With one income and dependants, the financial catastrophe is the earner's death: the household's income stops while its obligations continue. That is the core risk life insurance transfers. The spouse's death is a separate risk (replacement of unpaid work), assessed in its own right.
Why the other options are wrong
- AInflation affects the size of the need but is not the risk being insured.
- CRetirement income is a living need served by savings, not by life insurance on the earner.
- DChildcare cost is the risk created by the spouse's death, a separate analysis.
Exam tip
Identify whose death the policy responds to before naming the need. Coverage on the earner replaces the earner's income.
Common mistake
Mixing up the risk from the earner's death with the risk from the non-earner's death.
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 owns a cottage that has appreciated substantially. Why does this matter in a life insurance needs analysis?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.