LLQP Life Insurance · Component 2.1 · 30% of the exam
A split-dollar arrangement between an employer and an executive means:
- ATwo separate policies are issued, one owned by the employer and one by the executive, on the same life
- BThe insurer splits the commission between the agent who placed the policy and the employer's benefits consultant
- CThe executive pays all premiums personally, while the employer is named beneficiary for the amount of any loan it has made to the executive
- The employer and executive share the premiums, benefits and cash value of a single permanent policy under a written agreement
Correct answer: D) The employer and executive share the premiums, benefits and cash value of a single permanent policy under a written agreement
Split-dollar divides one policy's costs and benefits between two parties — for example, the employer funds and owns the cash value while the executive's family receives the death benefit. The curriculum lists it under business insurance; the tax treatment of each party's share must be handled carefully.
Why the other options are wrong
- ASplit-dollar uses one policy split by agreement.
- BThe split is between the parties to the policy, not the commission.
- CIn split-dollar the employer pays part of the premium.
Exam tip
Split-dollar: one policy, costs and benefits divided between employer and executive by written agreement; tax on each party's share must be planned.
Common mistake
Setting up split-dollar without a written agreement defining who gets what.
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.