LLQP Life Insurance · Component 1.1 · 35% of the exam
Which of the following is a capital expense arising at death, rather than an ongoing income need?
- Income tax owing on the deemed disposition of the client's assets at death
- BThe survivor's monthly living expenses, which the family must meet from the month after the death onward
- CThe survivor's retirement income, which must be funded once the survivor stops working
- DFuture inflation in the survivors' cost of living over the years the children remain dependent
Correct answer: A) Income tax owing on the deemed disposition of the client's assets at death
At death, capital property is deemed disposed of at fair market value, and the resulting tax is a lump-sum liability of the estate. Along with funeral costs, debts, education funds and bequests, it is a capital need — money required once, at death.
Why the other options are wrong
- BMonthly living expenses are the ongoing income need, calculated separately.
- CRetirement income for the survivor is an income need, not a one-time capital expense.
- DInflation is an assumption in the calculation, not an expense at death.
Exam tip
Capital needs are the lump sums due once at death: funeral, debts, taxes, education, bequests. Everything paid monthly is an income need.
Common mistake
Listing ongoing expenses under capital needs and double-counting them.
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?
- 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:
- A client owns a cottage that has appreciated substantially. Why does this matter in a life insurance needs analysis?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.