LLQP Life Insurance · Component 2.1 · 30% of the exam
Joint last-to-die insurance is most appropriate for:
- AA single person who wants to insure two separate risks under one contract to save on policy fees
- BA short-term loan on which both spouses are guarantors and which must be repaid on either death
- CReplacing income at the first death, so the surviving spouse can maintain the household until the children are independent
- Funding the tax liability that arises on the second spouse's death, when rolled-over assets are finally taxed
Correct answer: D) Funding the tax liability that arises on the second spouse's death, when rolled-over assets are finally taxed
Because a spousal rollover defers capital gains and registered plan tax to the surviving spouse's death, the liquidity need falls at the second death. Last-to-die coverage matches that timing and is cheaper than two single-life policies.
Why the other options are wrong
- ALast-to-die requires two lives.
- BA short-term loan is a term need, not a second-death estate need.
- CIncome replacement at the first death needs first-to-die or single-life coverage.
Exam tip
Spousal rollover defers tax to the second death; joint last-to-die matches that timing and costs less than two single policies.
Common mistake
Insuring the first death for a liability that only arises at the second.
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.