LLQP Life Insurance · Component 1.2 · 35% of the exam
When comparing the premiums of a client's existing policy with current market rates, the agent must remember that:
- ANew policies are always cheaper, since mortality has improved and insurers pass the savings on to new applicants
- BOld policies cannot be kept once a comparison has been made, since the review obliges the agent to recommend the better one
- CPremiums never change, so the comparison simply confirms that the client is paying the market rate
- A new policy would be priced at the client's current age and health, and replacing coverage restarts underwriting
Correct answer: D) A new policy would be priced at the client's current age and health, and replacing coverage restarts underwriting
An existing policy locks in the client's insurability at the age and health when it was issued. Even if current rates look lower, the client is older and may be less insurable. The comparison must be like-for-like and account for the risk of a decline or rating.
Why the other options are wrong
- ANew policies are not always cheaper once current age and health are priced in.
- BOld policies can be kept; that is often the better choice.
- CPremiums on new business change over time and with the applicant's age.
Exam tip
Compare an existing policy against what the client could actually buy today — at today's age and health — not against a rate card for a younger, healthier person.
Common mistake
Recommending replacement based on a quote that assumes the client is still insurable at standard rates.
What this tests
CISRO competency component 1.2 — 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.