LLQP Life Insurance · Component 1.1 · 35% of the exam
When an agent lists a client's liabilities during fact-finding, which detail is most important for the insurance calculation?
- AThe date the debt was taken out, since older debts are more likely to have been insured by the lender
- BThe interest rate only, since a high rate means the debt will grow faster if the survivors cannot pay it
- The outstanding balance and whether the debt would have to be repaid at death
- DThe name of the lender, since some lenders forgive debts on death while others pursue the estate
Correct answer: C) The outstanding balance and whether the debt would have to be repaid at death
The purpose is to know how much capital would be needed to clear debts that survive death — mortgages, loans, credit lines — so the survivors are not left servicing them. Some debts carry their own creditor insurance, which reduces the need.
Why the other options are wrong
- AWhen the debt began has no bearing on the balance due at death.
- BThe interest rate matters for cash flow, not for the lump sum needed to clear the debt.
- DThe lender's name does not change how much must be repaid.
Exam tip
For each debt, record the balance and whether it survives death; check for existing creditor insurance before adding it to the need.
Common mistake
Including a mortgage that already carries lender insurance without netting it out.
What this tests
CISRO competency component 1.1 — 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.