LLQP Life Insurance · Component 4.1 · 10% of the exam
A client paying annually asks to switch to monthly payments. The agent should explain that:
- Athe death benefit is reduced in proportion to the premiums still outstanding at the death
- Bthe change requires new evidence of insurability before it can take effect
- Cthe total annual cost falls because the insurer receives payments more frequently
- the annual cost rises slightly because of the modal factor applied to monthly payment
Correct answer: D) the annual cost rises slightly because of the modal factor applied to monthly payment
A modal factor compensates the insurer for lost investment income and extra administration. Monthly payment often suits a client's cash flow, but the annual difference should be stated.
Why the other options are wrong
- APayment frequency does not affect the death benefit.
- BA change of payment frequency is not an underwriting event.
- CMore frequent payment costs more over the year, not less.
Exam tip
Changing to monthly is a service request, not an underwriting one.
Common mistake
Switching a client to monthly without mentioning the higher annual cost.
What this tests
CISRO competency component 4.1 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.