LLQP Life Insurance · Component 1.3 · 35% of the exam
An agent runs both an income replacement calculation and a capital needs calculation and gets different results. The agent should:
- Adiscard both and rely on a simple multiple of the client's annual income instead
- Baverage the two figures and present that number as the recommended amount
- Cuse whichever figure is lower, so the premium quoted remains affordable
- explain what each approach measures and discuss which better fits the client's goals
Correct answer: D) explain what each approach measures and discuss which better fits the client's goals
The two approaches make different assumptions about whether capital is consumed or preserved. Explaining the difference lets the client choose the basis that matches what they want for their family.
Why the other options are wrong
- AA rule of thumb is less reliable than either calculation performed.
- BAn average of two different questions answers neither of them.
- CChoosing by affordability rather than analysis is backwards.
Exam tip
The two methods answer different questions; explain rather than average.
Common mistake
Presenting one figure without saying what it assumes.
What this tests
CISRO competency component 1.3 — 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.