LLQP Life Insurance · Component 1.2 · 35% of the exam
An in-force illustration shows a client's universal life policy exhausting its fund within a few years. The agent should explain that:
- Athe insurer will absorb any shortfall because the death benefit has been guaranteed
- Bthe fund automatically replenishes itself once the client reaches retirement age
- Cthe cost of insurance stops being deducted once the fund has been depleted
- the policy will lapse unless deposits increase or the coverage is reduced
Correct answer: D) the policy will lapse unless deposits increase or the coverage is reduced
A universal life policy funded at the minimum can run out of fund as the cost of insurance rises. The client must add deposits, reduce the coverage or accept the lapse, and acting early is far cheaper.
Why the other options are wrong
- AGuarantees depend on the funding required by the contract being maintained.
- BNothing replenishes the fund except further deposits or credited growth.
- CDeductions continue and are what exhaust the fund.
Exam tip
Request an in-force illustration on every universal life review.
Common mistake
Reviewing a universal life policy without projecting how long the fund lasts.
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.