LLQP Life Insurance · Component 1.2 · 35% of the exam
A client's group plan provides life coverage of twice annual salary to a stated maximum. He earns well above the salary at which the maximum applies. The review should note:
- AHis coverage is twice his salary, since the formula applies to every member regardless of income
- BHe should ask for a raise, since a higher salary would increase his coverage under the plan formula
- His coverage is capped at the plan maximum, less than twice his salary, so his group protection is smaller than he assumes
- DThe cap does not apply to him, since executives are placed in a class with a higher maximum under the plan's benefit formula
Correct answer: C) His coverage is capped at the plan maximum, less than twice his salary, so his group protection is smaller than he assumes
Plan maximums bite for higher earners. The curriculum lists 'limits on face amount' among group limitations. The gap between the formula and the cap is a common finding for executives and professionals.
Why the other options are wrong
- AThe formula is limited by the maximum.
- BA raise would not increase capped coverage.
- DCaps apply to everyone in the class.
Exam tip
Read the plan's maximum, not just its formula. High earners are often under-covered by group life.
Common mistake
Multiplying salary by the formula without checking the cap.
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.