LLQP Life Insurance · Component 2.1 · 30% of the exam
A policyholder elects reduced paid-up insurance. From that point:
- AThe full face amount continues for a limited time, after which the coverage ends entirely
- No further premiums are due and a smaller face amount of permanent insurance stays in force for life
- CThe policy is surrendered for its cash value, which the insurer pays to the owner in a lump sum
- DPremiums double for the balance of the contract, since the insurer has to fund the coverage from a smaller base
Correct answer: B) No further premiums are due and a smaller face amount of permanent insurance stays in force for life
Reduced paid-up trades the cash value for a lower, fully paid permanent death benefit. It suits a client who wants some coverage for life without further premiums. Extended term keeps the full amount but only temporarily.
Why the other options are wrong
- AKeeping the full face amount for a limited time is extended term.
- CCash surrender ends the coverage; reduced paid-up keeps some in force.
- DNo premiums are due after electing reduced paid-up.
Exam tip
Reduced paid-up: lower amount, for life, no more premiums. Extended term: full amount, limited time, no more premiums.
Common mistake
Confusing the two non-forfeiture insurance options.
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.