LLQP Life Insurance · Component 2.1 · 30% of the exam
A client who converts a term policy to permanent insurance will pay premiums based on:
- Her attained age at conversion, but at standard rates regardless of her current health
- BHer age when the term policy was first issued, since conversion preserves the original pricing basis of the contract
- CThe insurer's choice at the time, since conversion is a new contract and the insurer sets whatever rate it wishes
- DHer health at conversion, since the insurer reassesses the risk before issuing the permanent policy
Correct answer: A) Her attained age at conversion, but at standard rates regardless of her current health
Conversion protects insurability, not the original age. The new premium reflects the client's current age but is not affected by any deterioration in health, because no evidence is required. This is what makes conversion valuable to someone whose health has declined.
Why the other options are wrong
- BConversion does not preserve the original age; it preserves insurability.
- CThe premium is set by the contract's conversion terms and attained age.
- DHealth at conversion does not affect the premium; no evidence is required.
Exam tip
Conversion: new premium at attained age, standard class regardless of health. That is the value of the privilege.
Common mistake
Telling a client conversion keeps their original premium.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.