LLQP Life Insurance · Component 1.1 · 35% of the exam
A client who bought coverage three years ago has just had a second child. The most important effect on his situation is that:
- Athe existing policy must be surrendered and entirely rewritten for the new family
- Bnothing changes, since the existing coverage was calculated for the whole family already
- Cthe insurer will automatically increase the coverage to reflect the new dependant
- the income replacement period and the dependants' costs have both increased
Correct answer: D) the income replacement period and the dependants' costs have both increased
A new child extends the number of years the family would need replacement income and adds education and care costs. Beneficiary and guardian arrangements should also be reviewed at the same time.
Why the other options are wrong
- AAdditional coverage can be added without surrendering what exists.
- BAn additional dependant changes both the amount and the duration needed.
- CNo automatic increase occurs on the birth of a child.
Exam tip
A new dependant extends the need in years as well as increasing it in amount.
Common mistake
Adding coverage for a new child without extending the income period.
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.