LLQP Life Insurance · Component 3.1 · 25% of the exam
How does an insurer's 'retention limit' affect a large application?
- AIt caps how much the applicant can buy from that insurer, so a larger need must be split among several different companies
- BIt has no effect on the application, since retention is an internal accounting matter for the insurer
- Amounts above the retention are reinsured, so the reinsurer's requirements may also apply
- DIt sets the premium, since the insurer charges more for coverage above the amount it is prepared to keep
Correct answer: C) Amounts above the retention are reinsured, so the reinsurer's requirements may also apply
Insurers retain risk only up to their limit and cede the excess. On very large cases the reinsurer participates in the decision, which can add requirements and time. The applicant can still buy above the retention.
Why the other options are wrong
- ARetention limits what the insurer keeps, not what the client can buy.
- BLarge cases are affected through reinsurance involvement.
- DPremium is set by class, not retention.
Exam tip
Large cases: expect reinsurer involvement, extra requirements, longer timelines.
Common mistake
Promising a fast issue on a jumbo case.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Life Insurance module. Written against the published curriculum.
More from component 3
- At policy delivery, the agent should obtain:
- The effective date of a life insurance policy is generally:
- A client's application is approved but he has not paid the first premium when the policy is delivered. The agent should:
- A pre-authorized debit form is part of implementation because:
- During implementation, the agent learns the client wants the policy owned by her corporation instead of personally, as first applied for. The correct step is:
- Which of the following is a legitimate reason an insurer might refuse to issue a policy even after favourable underwriting?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.