LLQP Life Insurance · Component 1.2 · 35% of the exam
A client's mortgage insurance through the lender covers only the mortgage balance. His spouse asks what happens to the coverage if they refinance with a different lender.
- AIt transfers automatically to the new lender, since the coverage follows the borrower rather than the mortgage that secured it
- Lender mortgage insurance is tied to that lender's mortgage and generally ends on discharge
- CIt doubles, since the client will now have coverage through both the old lender and the new one for the same debt
- DIt continues for life, since the premium paid at the outset bought coverage that outlasts any particular mortgage
Correct answer: B) Lender mortgage insurance is tied to that lender's mortgage and generally ends on discharge
Creditor insurance follows the loan, not the borrower. Refinancing elsewhere ends it, and the client must re-qualify at an older age and current health. This lack of portability is a key limitation the review should note.
Why the other options are wrong
- ACreditor insurance does not transfer between lenders.
- CNothing doubles; creditor coverage ends when the insured loan is discharged.
- DIt ends with the mortgage.
Exam tip
Lender coverage ends with the loan; personally owned coverage follows the client. Explain the portability difference.
Common mistake
Assuming mortgage insurance survives a change of lender.
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.