LLQP Life Insurance · Component 2.1 · 30% of the exam
Decreasing term insurance is most commonly matched to:
- AA charitable bequest that the client wants to scale down as the estate grows
- BEstate taxes that grow over time as the client's assets appreciate in value
- A declining mortgage balance that is paid down over the amortization period
- DA growing family's income needs during the years the children remain dependent
Correct answer: C) A declining mortgage balance that is paid down over the amortization period
Decreasing term has a face amount that falls over time while the premium usually stays level; it mirrors an amortizing debt. Note that a personally owned level term policy is often preferred over a lender's mortgage insurance because the client controls it and the benefit does not shrink.
Why the other options are wrong
- AA bequest is a fixed lump sum best served by level or permanent coverage.
- BEstate taxes grow with asset values; a decreasing benefit would leave them under-funded.
- DA growing family's needs rise, the opposite of a decreasing benefit.
Exam tip
Decreasing term mirrors an amortizing debt. Still, a personally owned level policy usually beats lender mortgage insurance on control and value.
Common mistake
Recommending decreasing term for a need that grows or stays level.
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.