LLQP Life Insurance · Component 2.1 · 30% of the exam
A whole life policy's contract includes a table of guaranteed cash values. This means the values shown:
- Aare projections that vary with the insurer's investment results each year
- Bapply only if the policyholder keeps the policy until its maturity date
- will be available at the stated durations regardless of the insurer's experience
- Dinclude the value of any dividends the policy is expected to earn in future
Correct answer: C) will be available at the stated durations regardless of the insurer's experience
Guaranteed values are a contractual promise that does not depend on experience. Dividends and paid-up additions add to them, and those amounts are not guaranteed.
Why the other options are wrong
- AGuaranteed values are contractual and do not vary with results.
- BThe values apply at each stated duration, not only at maturity.
- DDividend values are shown separately and are not guaranteed.
Exam tip
Separate the guaranteed column from the dividend-dependent values.
Common mistake
Quoting a total projected value as though all of it were guaranteed.
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.