LLQP Life Insurance · Component 1.3 · 35% of the exam
Estate equalization is a life insurance need that arises when:
- One heir is to receive an indivisible asset such as a farm, and the client wants the other heirs to receive equivalent value
- BAll heirs will receive identical assets, and the client wants insurance to top up each share by the same amount
- CThe estate has no tax liability, so the client can use insurance to increase what each heir receives
- DThe client has no heirs, and the estate must be equalized between the charities named in the will
Correct answer: A) One heir is to receive an indivisible asset such as a farm, and the client wants the other heirs to receive equivalent value
When one child takes over the family business or farm, life insurance can provide the other children with cash of equal value, avoiding a forced sale or family conflict. The curriculum lists estate equalization among the needs suitably met by life insurance.
Why the other options are wrong
- BIf all heirs receive identical assets, there is nothing to equalize.
- CEqualization is about fairness among heirs, not the estate's tax position.
- DWith no heirs there is no one to equalize between.
Exam tip
Equalization: one child gets the indivisible asset, the others get insurance cash of equal value. Prevents a forced sale.
Common mistake
Assuming a business must be sold to treat heirs fairly.
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.