LLQP Life Insurance · Component 2.1 · 30% of the exam
The cash surrender value of a whole life policy is:
- AThe death benefit the policy will pay, less any outstanding loans at the time of death
- BEqual to the premiums paid to date, since the insurer returns the client's money on surrender
- CAlways zero in the first ten years, since the insurer recovers its acquisition costs before crediting any value
- The amount received on surrender, derived from the reserve less any surrender charges and outstanding loans
Correct answer: D) The amount received on surrender, derived from the reserve less any surrender charges and outstanding loans
CSV is a non-forfeiture value guaranteed in the contract (in non-par policies) and grows over time. Early-year values are low because of acquisition costs. Surrender ends the coverage and may trigger a taxable policy gain.
Why the other options are wrong
- ACSV is not the death benefit.
- BCSV rarely equals premiums paid; early years are lower because of acquisition costs.
- CCSV is not always zero for ten years; it grows slowly from the early years.
Exam tip
CSV = reserve less surrender charges and loans. Surrender ends coverage and may create a taxable policy gain.
Common mistake
Promising a client the cash value will equal what they paid in.
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.