LLQP Life Insurance · Component 2.1 · 30% of the exam
A universal life policy with a 'level death benefit' pays:
- The face amount, with the account value forming part of it, so the net amount at risk declines as the fund grows
- BThe account value only, since the level option means the insurer's liability is limited to what the fund has earned
- CThe face amount plus the account value, so the beneficiary receives both the insurance and the savings
- DDouble the face amount, since the level option is priced to return the fund as well as the coverage
Correct answer: A) The face amount, with the account value forming part of it, so the net amount at risk declines as the fund grows
Under a level death benefit option the fund is inside the face amount, so the insurer's net amount at risk (and the cost of insurance) shrinks as the fund grows. Under the 'face plus fund' option the beneficiary receives both, and the amount at risk stays level.
Why the other options are wrong
- BThe account value alone is not the death benefit under either option.
- CFace amount plus fund describes the increasing death benefit option.
- DNothing about the level option doubles the face amount.
Exam tip
Level death benefit: fund inside the face amount, net amount at risk falls as the fund grows. Face plus fund: both are paid, amount at risk stays level.
Common mistake
Confusing the two UL death benefit 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.