LLQP Life Insurance · Component 2.1 · 30% of the exam
A 'premium offset' arrangement on a participating policy is best described as:
- AA conversion to term at the point where dividends exceed the cost of insurance, after which the client pays nothing further for coverage
- A point at which projected dividends are expected to cover the premium, depending on the scale
- CA guaranteed paid-up date set at issue, after which the insurer cannot ask the client for further premiums
- DA refund of all premiums paid to date, funded by the accumulated dividends, after which the policy continues free
Correct answer: B) A point at which projected dividends are expected to cover the premium, depending on the scale
Offset is a projection, not a contract term. If dividends fall short, premiums may become payable again. The agent must present it as an expectation with risk.
Why the other options are wrong
- AThe policy stays participating whole life.
- CThere is no guarantee; the date can move.
- DNo refund is involved.
Exam tip
Premium offset ≠paid up. One is a projection, the other a contractual status.
Common mistake
Using 'paid up' when describing premium offset.
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.