LLQP Life Insurance · Component 2.2 · 30% of the exam
The main reason to explain a rider's exclusions and limitations to the client is:
- ATo increase the premium, since a client who understands the exclusions will accept a higher rate
- So the client understands the actual value of the coverage and does not rely on a benefit that may not be paid
- CIt is not required, since the exclusions are set out in the policy document the client receives at delivery and can read at leisure
- DTo discourage the purchase of riders the agent considers poor value for the premium charged
Correct answer: B) So the client understands the actual value of the coverage and does not rely on a benefit that may not be paid
The curriculum lists 'meaning and value of coverage in spite of limitations, modifications and exclusions'. An accidental death rider is a good example: valuable but only for one cause of death. Explaining the boundaries is part of a suitable recommendation.
Why the other options are wrong
- ADisclosure does not change the premium.
- CExplaining exclusions and limitations is required for a suitable recommendation.
- DExplaining limits is about informed choice, not discouragement.
Exam tip
State what the rider will not pay as clearly as what it will. Accidental death is the standard example.
Common mistake
Describing a rider only by its headline benefit.
What this tests
CISRO competency component 2.2 — 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.