LLQP Life Insurance · Component 2.1 · 30% of the exam
The main disadvantage of renewable term insurance for a long-term need is that:
- AIt cannot be renewed once the first term ends, so the client must reapply with new evidence of insurability
- BIt has no death benefit after the first term, since renewal continues the contract but not the coverage
- CIt requires a medical exam at every renewal, so a client whose health has declined will be declined
- Premiums rise at each renewal and become very expensive at older ages, and coverage ends at the expiry age
Correct answer: D) Premiums rise at each renewal and become very expensive at older ages, and coverage ends at the expiry age
Renewal without evidence is the advantage; the escalating premium is the cost. For a permanent need, converting to permanent insurance early is usually cheaper over a lifetime than renewing term repeatedly.
Why the other options are wrong
- ARenewable term can be renewed; that is its defining feature.
- BThe death benefit continues through every renewal.
- CRenewal is precisely what does not require a medical exam.
Exam tip
For a permanent need, converting term early is usually cheaper over a lifetime than renewing repeatedly into the expensive age bands.
Common mistake
Treating renewable term as a permanent solution.
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.