LLQP Life Insurance · Component 2.1 · 30% of the exam
In a universal life policy, the policyholder can generally:
- AOnly reduce the premium below the minimum, since the insurer fixes the deposit schedule at issue
- BOnly change the beneficiary, since the face amount and deposits are locked in by the exempt test
- Change the face amount and vary the timing and amount of deposits within limits
- DNever change anything after issue, since the contract is priced on the assumptions made at application
Correct answer: C) Change the face amount and vary the timing and amount of deposits within limits
Flexibility is UL's defining feature: face amount, deposit timing and amount (within the minimum needed to cover charges and the maximum allowed by the exempt test), and investment choices. The trade-off is that the policyholder bears the consequences of those choices.
Why the other options are wrong
- ADeposits can be increased as well as decreased, within limits.
- BFar more than the beneficiary can be changed.
- DFlexibility after issue is UL's defining feature.
Exam tip
UL flexibility: face amount, deposit timing and amount, investment mix. The client also carries the consequences of those choices.
Common mistake
Assuming UL's flexibility means the policy will fund itself.
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.