LLQP Life Insurance · Component 1.3 · 35% of the exam
A client's needs analysis has been done in today's dollars with a real rate of return. Ten years later, at review, the agent should:
- AReuse the old figures, since a real rate of return already accounts for the changes that inflation causes over a ten-year period
- Redo the analysis with current income, expenses, dependants, resources and assumptions
- CAssume the need has disappeared, since ten years of premiums have built enough value to cover the family
- DSimply add 10% to the coverage to reflect inflation, since the original analysis was done in today's dollars
Correct answer: B) Redo the analysis with current income, expenses, dependants, resources and assumptions
A decade changes everything: children older, debts different, income higher, coverage possibly grown or lapsed. A fresh analysis, not an adjustment, is the professional approach.
Why the other options are wrong
- ATen-year-old inputs are obsolete.
- CThe need may have risen or fallen; only analysis will tell.
- DA blanket percentage ignores the actual changes.
Exam tip
Reviews rerun the analysis; they do not patch the old one.
Common mistake
Adjusting coverage by a rule of thumb instead of re-analyzing.
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.