LLQP Life Insurance · Component 2.2 · 30% of the exam
Under a terminal illness benefit, the amount advanced is typically:
- A percentage of the death benefit up to a maximum, with the remainder paid at death less the advance
- BUnlimited, since the insured may draw the whole death benefit in advance once a terminal diagnosis is confirmed
- CPaid to the insurer as a reserve against the death claim, so the beneficiary receives the balance faster at death
- DThe full death benefit plus interest, since the insurer pays early and compensates the insured for the time value
Correct answer: A) A percentage of the death benefit up to a maximum, with the remainder paid at death less the advance
Insurers cap the advance (a percentage and a dollar maximum). The beneficiary receives the balance at death. Explaining the cap avoids disappointment when the client expects the whole benefit early.
Why the other options are wrong
- BCaps apply; insurers limit the advance to a percentage and a maximum amount.
- CThe advance is paid to the policyholder.
- DThe advance is partial, and the balance is reduced by the advance.
Exam tip
Terminal illness benefit: partial advance, capped, balance at death net of the advance.
Common mistake
Telling a client they can take the entire death benefit early.
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.