LLQP Life Insurance · Component 1.1 · 35% of the exam
A client is the sole shareholder of a corporation that holds most of his wealth. Why does the needs analysis ask about the corporation's assets and structure?
- ATo calculate CPP survivor benefits, since the corporation's income determines the client's contributory record with the plan
- BTo sell group insurance to the corporation's employees, since the owner's personal review is the natural opening
- The shares are a capital asset with a deemed disposition at death, and liquidity depends on the business
- DIt does not, since the needs analysis concerns the client's personal finances and the corporation is a separate legal person
Correct answer: C) The shares are a capital asset with a deemed disposition at death, and liquidity depends on the business
For an owner-manager, the business is the estate. Valuation, tax on the shares, the possibility of corporate-owned insurance and the CDA, and succession all flow from the corporate structure. The analysis must include it.
Why the other options are wrong
- ACPP is unaffected by corporate structure.
- BGroup insurance is unrelated to the question.
- DThe corporation is central to an owner-manager's situation.
Exam tip
For business owners, the corporate balance sheet is part of the personal needs analysis.
Common mistake
Analyzing an owner-manager's personal finances without the business.
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.