LLQP Life Insurance · Component 1.3 · 35% of the exam
A client wants to fund a lump sum for a charity and also to leave education money for grandchildren. In the needs analysis these are:
- AIncome needs, since the charity and the grandchildren will expect the client's support to continue over the years
- BResources, since the charity's tax receipt and the grandchildren's RESP grants reduce the amount the estate must provide
- Capital needs that add to the total, each sized by the client's wish
- DNot insurable, since life insurance may be used only to protect dependants and cannot fund discretionary gifts
Correct answer: C) Capital needs that add to the total, each sized by the client's wish
Bequests and education funds are one-time amounts at death. They are added to the capital needs, and the insurance amount rises accordingly. Because they are discretionary, the client sets their size.
Why the other options are wrong
- AThey are one-time capital needs, not ongoing income.
- BThey are needs, not resources.
- DBoth are routinely funded by life insurance.
Exam tip
Wishes — bequests, gifts, education funds — are capital needs the client sizes.
Common mistake
Leaving discretionary bequests out of the analysis because they are optional.
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.