LLQP Life Insurance · Component 1.1 · 35% of the exam
Which of the following income sources should be included when determining the income a family would lose at the client's death?
- Salary, bonuses, commissions, self-employment earnings and the value of employer benefits that would end
- BOnly after-tax salary, since the family never received the portion that went to tax
- COnly base salary, since bonuses and commissions are not guaranteed and cannot be relied on to continue in the years ahead
- DInvestment income, which stops at death when the client is no longer managing the portfolio
Correct answer: A) Salary, bonuses, commissions, self-employment earnings and the value of employer benefits that would end
All earned income and benefits tied to employment stop at death: base pay, variable compensation, employer pension contributions, group benefits. Investment income continues for the survivors because the assets remain.
Why the other options are wrong
- BThe analysis usually starts with gross income and applies tax assumptions explicitly.
- CBase salary alone understates the loss when bonuses and benefits are significant.
- DInvestment income continues after death because the survivors keep the assets.
Exam tip
Employment-related income and benefits stop at death; investment income does not. Count the former, keep the latter as a resource.
Common mistake
Forgetting employer pension contributions and benefits when valuing lost income.
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.