LLQP Life Insurance · Component 1.3 · 35% of the exam
In analyzing the death of a stay-at-home parent, the most significant cost to quantify is usually:
- Athe loss of that parent's employment income and workplace pension entitlement
- Bthe reduction in the household's charitable giving in the years that follow
- the cost of paid childcare and household services the family would need
- Dthe estate taxes payable on assets registered in that parent's own name
Correct answer: C) the cost of paid childcare and household services the family would need
The contribution is unpaid but real. Replacing childcare, transport and household management can cost a substantial amount each year until the children are older, and the surviving parent may also reduce work hours.
Why the other options are wrong
- AThere is no employment income to replace in this situation.
- BCharitable giving is not a survivor's essential cost.
- DA stay-at-home parent typically holds few assets triggering tax.
Exam tip
Value unpaid work at what it would cost to buy in the market.
Common mistake
Concluding no coverage is needed because there was no salary.
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.