LLQP Life Insurance · Component 1.1 · 35% of the exam
A seasonal construction worker's income arrives in a few concentrated months each year. In determining his situation the agent should:
- Ause the peak monthly income figure, since that is what the household is accustomed to
- Buse only the months with earnings and ignore the remainder of the calendar year
- use average annual income over several years and note the cash flow pattern
- Dexclude him from a needs analysis, since irregular income cannot be modelled
Correct answer: C) use average annual income over several years and note the cash flow pattern
Income replacement should reflect what the household actually lives on across a full year. The uneven pattern also matters for premium affordability, so a payment mode matching the earning season may suit better.
Why the other options are wrong
- APeak months overstate what the household lives on annually.
- BIgnoring the unearning months misrepresents the annual position.
- DIrregular income is common and is handled by averaging.
Exam tip
Average irregular income across years and match the premium mode to cash flow.
Common mistake
Building a plan on peak earnings the client cannot sustain in every month.
What this tests
CISRO competency component 1.1 — 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.