LLQP Life Insurance · Component 1.3 · 35% of the exam
Under the capital needs approach, the total insurance need is found by:
- ATaking the mortgage balance only, since clearing the home is the family's most pressing need after a death
- Adding all capital needs at death and income needs, then subtracting existing resources
- CMultiplying income by a fixed factor that reflects the number of years to the client's planned retirement
- DUsing the group plan amount as the baseline and adding a margin for inflation over the years of dependency
Correct answer: B) Adding all capital needs at death and income needs, then subtracting existing resources
Capital needs analysis totals the lump sums due at death (final expenses, debts, taxes, education, bequests), adds the capital needed to generate ongoing income, and subtracts what is already available (existing insurance, liquid assets, group and government benefits). The shortfall is the recommendation.
Why the other options are wrong
- AThe mortgage is one capital need among several.
- CA fixed factor is a shortcut that ignores the client's specific needs and resources.
- DThe group plan amount is a resource to subtract, not the answer.
Exam tip
Total need = capital needs + capital for income needs − existing resources. Know the three parts and their order.
Common mistake
Forgetting to subtract existing resources, which overstates the recommendation.
What this tests
CISRO competency component 1.3 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.