LLQP Life Insurance · Component 1.3 · 35% of the exam
A client's main need is the tax that will arise on appreciating assets at death. The characteristic of this need is that it:
- Acan be eliminated entirely by naming a beneficiary on each of the assets
- Bdecreases steadily as the client ages and eventually disappears altogether
- grows with the assets and arises only at death, which suits permanent coverage
- Dis best covered by a short-term policy renewed every ten years
Correct answer: C) grows with the assets and arises only at death, which suits permanent coverage
A deemed disposition liability grows alongside the assets and crystallizes at death, often at the second death for a couple. Permanent coverage, frequently a last-to-die contract, matches both the timing and the growth.
Why the other options are wrong
- ADesignations change who receives assets, not the tax that arises.
- BThe liability typically grows rather than shrinking with age.
- DTerm coverage expires long before the need does.
Exam tip
A tax liability at death is permanent, growing and best matched by permanent coverage.
Common mistake
Using term coverage for a liability that only arises at death.
What this tests
CISRO competency component 1.3 — 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.