LLQP Life Insurance · Component 1.2 · 35% of the exam
A client owns a participating whole life policy whose dividends have been buying paid-up additions for twenty years. The review should recognize that:
- ADividends must now be taken in cash, since the policy has reached the maximum paid-up additions the insurer permits
- BThe death benefit is still the original face amount, since paid-up additions build cash value rather than coverage
- CThe policy has lapsed, since twenty years of dividends buying additions means no premiums have been paid
- The death benefit and cash value have grown beyond the original face amount, and current values should be obtained
Correct answer: D) The death benefit and cash value have grown beyond the original face amount, and current values should be obtained
Paid-up additions accumulate. A policy sold decades ago may now provide far more coverage than its face page shows. Requesting an in-force statement gives the true figures for the needs analysis.
Why the other options are wrong
- AThe dividend option can remain as is.
- BPUAs have increased the death benefit above the original amount.
- CNothing suggests a lapse.
Exam tip
Always get an in-force statement for old participating policies; the face page understates them.
Common mistake
Using the original face amount for a policy that has grown with paid-up additions.
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.