LLQP Life Insurance · Component 2.1 · 30% of the exam
Under the 'exempt test' for a life insurance policy, the term 'accumulating fund' refers to:
- AThe death benefit payable under the policy, which must stay within the limit set by the benchmark
- The policy's cash value or investment account, whose growth is measured against a benchmark exempt policy
- CThe total of premiums paid into the policy since issue, which the test compares with the death benefit
- DThe insurer's general fund, from which the policy's guarantees are paid if the accumulating fund falls short
Correct answer: B) The policy's cash value or investment account, whose growth is measured against a benchmark exempt policy
The accumulating fund is the policy's savings element. As long as it stays below the exempt limit, the growth is not taxed annually. Insurers monitor the test yearly and adjust as needed.
Why the other options are wrong
- AThe death benefit is the coverage, not the fund.
- CPremiums are inputs; the fund is what accumulates.
- DThe insurer's general fund is not the policy's accumulating fund.
Exam tip
Accumulating fund vs exempt limit: the ratio that keeps a policy tax-exempt.
Common mistake
Confusing the accumulating fund with the death benefit.
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.