LLQP Life Insurance · Component 1.1 · 35% of the exam
A client's savings sit largely in a tax-free savings account. For the analysis this means the balance is:
- Acounted at half its value because only part can be withdrawn free of tax
- Bunavailable to survivors because the account closes immediately on the holder's death
- a liquid resource that reaches survivors without an income inclusion arising
- Dfully taxable on the final return like any other registered plan balance
Correct answer: C) a liquid resource that reaches survivors without an income inclusion arising
The value at death is received without tax, and a successor holder or designated beneficiary can receive it directly. This makes such accounts particularly useful as the liquid reserve in a plan.
Why the other options are wrong
- AThe full value is available; there is no half measure.
- BThe account value passes to a successor holder or beneficiary.
- DNo income inclusion arises on the value accumulated at death.
Exam tip
Tax-free account balances are the cleanest liquid resource at death.
Common mistake
Applying registered plan tax treatment to a tax-free savings account.
What this tests
CISRO competency component 1.1 — 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.