LLQP Life Insurance · Component 4.1 · 10% of the exam
A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- AReductions require full underwriting, since the insurer must reassess the risk whenever the terms of the contract are changed
- Reductions generally need no evidence but may affect premium, riders and exempt status
- CReductions are prohibited under the Insurance Act, since the face amount is fixed for the life of the contract
- DThe insurer will refuse, since a reduction lowers the premium and the insurer has no incentive to agree to it
Correct answer: B) Reductions generally need no evidence but may affect premium, riders and exempt status
Decreasing coverage lowers the insurer's risk, so no evidence is needed. But the reversal is not free: an increase later is underwritten. Confirm the need has truly fallen before reducing.
Why the other options are wrong
- ADecreases are not underwritten.
- CReductions are a normal amendment.
- DInsurers accept reductions within contract minimums.
Exam tip
Reduce only when sure; increasing again means new underwriting.
Common mistake
Reducing coverage during a temporary cash crunch instead of exploring other options.
What this tests
CISRO competency component 4.1 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
- The primary purpose of a periodic policy review is to:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.