LLQP Life Insurance · Component 1.2 · 35% of the exam
A client's existing universal life policy has a level cost of insurance. Compared with a YRT cost structure, this means:
- AThe premium is refunded at the end of each year if the fund has earned more than the cost of insurance
- BThere is no mortality charge, since the level structure builds the cost of insurance into the deposit
- CThe mortality charge rises each year with the insured's age, in the same way as yearly renewable term, until the policy anniversary at 100
- The mortality charge is fixed for life, higher early but stable later, protecting the fund from escalating costs at older ages
Correct answer: D) The mortality charge is fixed for life, higher early but stable later, protecting the fund from escalating costs at older ages
Level COI averages the cost; YRT starts cheaper and climbs. For a policy meant to last to advanced ages, level COI reduces the risk that rising charges exhaust the fund — a point the review should confirm against the client's goals.
Why the other options are wrong
- ACost structure has nothing to do with refunds.
- BEvery UL policy carries a cost of insurance.
- CA rising annual charge describes YRT.
Exam tip
YRT = cheap early, expensive late. Level = higher early, stable late. Match to the intended holding period.
Common mistake
Assuming a low early YRT charge makes the policy cheaper over a lifetime.
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.