LLQP Life Insurance · Component 2.1 · 30% of the exam
A member's group plan pays a survivor income benefit of a percentage of salary to the spouse for five years. The agent evaluating the member's total coverage should treat this as:
- APermanent income for the spouse's lifetime, since the plan's obligation continues for as long as the surviving spouse remains alive
- BA lump sum equal to the member's annual salary, paid to the spouse in addition to the basic life benefit
- CIrrelevant to the analysis, since group survivor benefits are too uncertain to be counted as a resource
- A temporary income stream whose present value is a resource, ending after five years
Correct answer: D) A temporary income stream whose present value is a resource, ending after five years
Survivor income benefits are valued by their duration and amount. Five years of partial salary is meaningful but temporary; the needs analysis should continue funding beyond that period.
Why the other options are wrong
- AIt ends after five years.
- BIt is an income stream, not a lump sum.
- CIt is a real resource for the period it lasts.
Exam tip
Value income benefits by their present value and duration; they rarely cover the whole period of need.
Common mistake
Treating a temporary survivor income as if it lasted for the survivor's life.
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.