LLQP Life Insurance · Component 2.1 · 30% of the exam
A client with a substantial estate and maxed-out registered plans wants tax-sheltered growth she will not need in her lifetime. The product category that fits is:
- ARenewable term, since the low premium leaves the most money available for investment outside the policy
- Permanent insurance, universal life or participating whole life, over-funded within the exempt limits
- CGroup life through the employer, since the employer's contributions accumulate tax-free for the member
- DDecreasing term, since the shrinking premium can be redirected to investments as the coverage falls
Correct answer: B) Permanent insurance, universal life or participating whole life, over-funded within the exempt limits
Exempt permanent insurance offers tax-deferred accumulation and a tax-free death benefit outside the estate. For a client who does not need the money while alive, it is an efficient wealth-transfer vehicle.
Why the other options are wrong
- ATerm has no accumulation.
- CGroup life has no accumulation.
- DDecreasing term is pure, shrinking protection.
Exam tip
Excess wealth + no need for access + heirs = over-funded exempt permanent insurance.
Common mistake
Recommending accumulation strategies to a client who will need the money.
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.