LLQP Life Insurance · Component 1.3 · 35% of the exam
A needs analysis shows the client's business would fail within months of his death because he is its only rainmaker. The insurance need this identifies is:
- AA group plan for the staff, so that employees are protected if the business closes after the owner's death
- BDisability insurance on the owner, since the business is equally exposed if the owner cannot work
- Business continuation coverage through key person insurance, giving the business time and money to recover or wind down
- DA larger personal term policy only, since the family's need is what matters and the business will simply close
Correct answer: C) Business continuation coverage through key person insurance, giving the business time and money to recover or wind down
Where a business depends on one person, that person's death is a business risk as well as a family risk. Key person coverage funds the transition; it is distinct from the owner's personal coverage, which protects the family.
Why the other options are wrong
- AA group plan protects employees' families, not the business's survival.
- BDisability insurance addresses the owner's living inability to work, not death.
- DA larger personal policy pays the family; it does not keep the business running.
Exam tip
When the business depends on one person, separate two needs: the family's (personal coverage) and the business's (key person coverage).
Common mistake
Assuming the owner's personal policy also protects the business.
What this tests
CISRO competency component 1.3 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.