LLQP Life Insurance · Component 2.1 · 30% of the exam
'Modal factor' refers to:
- AThe dividend interest rate credited to accumulated dividends under a participating policy
- BThe face amount per unit of coverage that the insurer uses to quote premiums
- The multiplier insurers apply when premiums are paid more often than annually, raising the total cost
- DThe rating applied for hazardous sports, expressed as a multiple of the standard premium for the insured's age and class
Correct answer: C) The multiplier insurers apply when premiums are paid more often than annually, raising the total cost
The curriculum lists the impact of the modal factor under universal life deposits, but it applies to all products: paying monthly costs more over a year than paying annually. It is a legitimate point of advice for clients with cash-flow flexibility.
Why the other options are wrong
- AThe dividend interest rate is a separate concept.
- BFace amount per unit is a pricing unit, not the modal factor.
- DHazardous-sport ratings are flat extras, not modal factors.
Exam tip
Modal factor: the loading for paying monthly or quarterly instead of annually. Applies to every product.
Common mistake
Assuming payment frequency has no effect on total cost.
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.