LLQP Life Insurance · Component 2.1 · 30% of the exam
Which of the following is a common situation where term insurance is the appropriate recommendation?
- AA permanent estate-tax need that will exist whenever the client dies, however long that may be
- A large but temporary need, such as a mortgage or child-rearing years, on a limited budget
- CFunding a charitable bequest at death in old age, when the client expects to have accumulated the most wealth
- DA client who wants a savings component within the policy to supplement retirement income
Correct answer: B) A large but temporary need, such as a mortgage or child-rearing years, on a limited budget
The curriculum names 'short-term risks, limited funds for premiums' as the circumstances for term. Permanent needs, savings objectives and lifetime bequests point to permanent products.
Why the other options are wrong
- AA permanent tax need calls for permanent coverage.
- CA bequest at death in old age is a permanent need; term would expire first.
- DTerm has no savings component.
Exam tip
Term for short-term risks and limited budgets; permanent for lifelong needs and savings objectives.
Common mistake
Recommending term for a need that will still exist at 85.
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.