LLQP Life Insurance · Component 1.2 · 35% of the exam
A client's existing term-to-65 policy will expire in three years, but her needs analysis shows a permanent estate-tax need. The review should:
- AConclude the coverage is appropriate, since the amount matches the tax liability the analysis identified
- BRecommend cancelling now to save premiums, since a policy with three years left provides little further value
- Identify the mismatch between temporary coverage and a permanent need, and evaluate conversion before the deadline
- DRecommend letting the policy expire and buying new coverage at that point, when the tax liability is clearer
Correct answer: C) Identify the mismatch between temporary coverage and a permanent need, and evaluate conversion before the deadline
Assessing appropriateness means matching the type and duration of existing coverage to the need. A permanent need served by expiring term coverage is a gap; the conversion privilege, if still available, is usually the cheapest way to close it.
Why the other options are wrong
- ATemporary coverage for a permanent need is not appropriate.
- BCancelling early loses coverage and forfeits the conversion option.
- DLetting a policy expire while a permanent need exists leaves the estate exposed.
Exam tip
Appropriateness means matching type and duration to the need. Term coverage for a permanent need is a gap even while it is in force.
Common mistake
Judging existing coverage only by its amount and ignoring its duration.
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.