LLQP Life Insurance · Component 2.2 · 30% of the exam
A cost of living rider increases a client's coverage periodically. The client should understand that each increase:
- Areduces the base policy's death benefit by the amount of the increase
- raises the premium, since the additional coverage must be paid for
- Crequires fresh evidence of insurability before it can take effect
- Dis provided at no additional cost because the rider premium was paid at issue
Correct answer: B) raises the premium, since the additional coverage must be paid for
The rider adds coverage without new evidence, but the extra amount carries its own premium. A client who declines several increases may lose the right to future ones under the contract.
Why the other options are wrong
- AThe increases add to the coverage rather than reducing it.
- CThe rider's value is that no evidence is required.
- DAdditional coverage always carries an additional premium.
Exam tip
Indexation adds coverage without evidence but not without cost.
Common mistake
Promising indexed increases at no additional premium.
What this tests
CISRO competency component 2.2 — 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.