LLQP Life Insurance · Component 1.2 · 35% of the exam
An in-force illustration for a participating policy shows values well below the original projection. The most likely explanation is that:
- Athe client has missed premium payments that the illustration does not disclose
- Ban administrative error has occurred and the insurer will restore the values
- Cthe insurer has breached the contract by failing to credit the promised dividends
- the dividend scale has been reduced since the policy was issued, as it may be
Correct answer: D) the dividend scale has been reduced since the policy was issued, as it may be
Dividends reflect the insurer's mortality, investment and expense experience and are not guaranteed. A lower scale means slower growth in values and a later premium offset date, which the client should understand.
Why the other options are wrong
- AMissed premiums would appear in the policy's status, not as lower values.
- BA lower scale is an experience outcome rather than an error.
- COnly guaranteed elements are contractual promises.
Exam tip
Original projections are not promises; the dividend scale can fall.
Common mistake
Treating an old illustration as a statement of what the policy will do.
What this tests
CISRO competency component 1.2 — 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.