LLQP Life Insurance · Component 3.2 · 25% of the exam
A client with a high marginal tax rate and maximized registered plans wants to reduce tax on non-registered investment income. Which insurance-based strategy fits, and what caution applies?
- Over-funding an exempt permanent policy to shelter growth, with cautions on charges and access
- BTerm insurance for the largest amount available, with no particular caution since term is the simplest product on the market
- CGroup life through the employer, with no caution since the employer bears the cost and the coverage is tax-free
- DCancelling all insurance and investing the premiums, since the client's registered plans already provide enough shelter
Correct answer: A) Over-funding an exempt permanent policy to shelter growth, with cautions on charges and access
Insured retirement and estate strategies use exempt policies as tax shelters. They are legitimate for surplus capital but carry costs and liquidity limits that must be disclosed. The recommendation must show the client is a fit.
Why the other options are wrong
- BTerm shelters nothing.
- CGroup life has no accumulation.
- DCancelling insurance addresses nothing.
Exam tip
Tax-sheltered accumulation in insurance: surplus money, long horizon, costs disclosed.
Common mistake
Recommending an over-funded policy to a client who will need the money.
What this tests
CISRO competency component 3.2 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Life Insurance module. Written against the published curriculum.
More from component 3
- At policy delivery, the agent should obtain:
- The effective date of a life insurance policy is generally:
- A client's application is approved but he has not paid the first premium when the policy is delivered. The agent should:
- A pre-authorized debit form is part of implementation because:
- During implementation, the agent learns the client wants the policy owned by her corporation instead of personally, as first applied for. The correct step is:
- Which of the following is a legitimate reason an insurer might refuse to issue a policy even after favourable underwriting?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.