LLQP Life Insurance · Component 2.1 · 30% of the exam
A yearly renewable term (YRT) policy differs from 10-year level term in that:
- AYRT has a cash value that grows each year, while level term has none
- BYRT premiums are level for ten years, then renew annually, while level term renews every ten years
- YRT premiums rise every year with age, starting lowest, while level term fixes the premium for the term
- DYRT cannot be renewed after the first year, while level term renews automatically for further terms at the same premium
Correct answer: C) YRT premiums rise every year with age, starting lowest, while level term fixes the premium for the term
YRT is the purest form of term: each year's premium reflects that year's mortality. It is cheapest at the start and most expensive over a long period. Level term averages the cost over the term.
Why the other options are wrong
- AYRT has no cash value.
- BYRT premiums are not level; they rise annually.
- DYRT is renewable each year by definition.
Exam tip
YRT: cheapest at first, rising every year. Level term averages the cost. Over a long period, level term usually wins.
Common mistake
Choosing YRT for a long-term need because the first-year premium is lowest.
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.