LLQP Life Insurance · Component 2.1 · 30% of the exam
A group member's certificate states coverage is 'two times annual earnings, rounded to the next thousand'. This is an example of:
- AA dividend option, since the rounding rule determines how much of the insurer's surplus is credited to each member of the group each year
- A benefit formula, which sets coverage objectively for every member in the class
- CA rider that adds coverage above the basic amount for members whose earnings exceed a threshold
- DIndividual underwriting, since each member's earnings are assessed separately to set their coverage
Correct answer: B) A benefit formula, which sets coverage objectively for every member in the class
Group benefits are set by formula (salary multiple, flat amount, or position-based schedule) so that no member chooses their own amount. That is a core anti-selection control and a reason evidence is not needed below the non-evidence maximum.
Why the other options are wrong
- ADividend options belong to participating individual policies.
- CThe formula is the plan's basic benefit, not an add-on.
- DFormulas replace individual underwriting.
Exam tip
Group coverage is formula-driven; members cannot pick their own amount of basic coverage.
Common mistake
Assuming a member can request more basic group coverage without evidence.
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.