LLQP Life Insurance · Component 2.1 · 30% of the exam
In a universal life policy, a 'guaranteed interest account' option:
- AInvests in equities selected by the insurer, with the return guaranteed not to fall below the index it tracks
- BIs prohibited under the exempt test, since a guaranteed return would cause the fund to exceed the permitted accumulation
- CGuarantees the death benefit only, so the client should not expect any particular return on the account value
- Credits a stated interest rate for a set period, like a GIC, while other accounts are market-linked
Correct answer: D) Credits a stated interest rate for a set period, like a GIC, while other accounts are market-linked
UL investment menus typically include guaranteed accounts alongside index-linked or managed accounts. Guaranteed accounts suit conservative clients or the portion of the fund needed to keep the policy funded.
Why the other options are wrong
- AEquity exposure comes from index-linked or equity accounts.
- BGuaranteed accounts are standard UL options.
- CThe death benefit guarantee is separate from investment options.
Exam tip
Match UL investment options to risk tolerance; a guaranteed account is the conservative anchor.
Common mistake
Assuming every UL fund is exposed to market risk.
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.