LLQP Life Insurance · Component 2.1 · 30% of the exam
What distinguishes permanent life insurance from term?
- APermanent insurance has no death benefit, since it is designed to accumulate cash value rather than pay at death
- BPermanent insurance has a lower premium, since the insurer spreads the cost over the insured's whole life
- Permanent insurance remains in force for the insured's whole life and typically builds cash value
- DPermanent insurance cannot have riders attached, since its guaranteed structure cannot be modified
Correct answer: C) Permanent insurance remains in force for the insured's whole life and typically builds cash value
Whole life, T-100 and universal life are the three permanent types in the curriculum. They do not expire at a set term, and most (T-100 sometimes excepted) accumulate cash value; their level premiums are higher than term early on because they prefund later mortality costs.
Why the other options are wrong
- APermanent insurance provides a death benefit for life.
- BPermanent premiums are higher than term, at least early on.
- DRiders can be attached to permanent policies.
Exam tip
Permanent = whole life, T-100, universal life. Designed to last a lifetime; most build cash value.
Common mistake
Assuming every permanent policy has a large cash value (T-100 often has little or none).
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.