LLQP Life Insurance · Component 1.1 · 35% of the exam
Which of the following is the best example of a client's tax exposure that life insurance can address?
- AGST on groceries and other consumption taxes the family will keep paying after the death
- The tax due on registered retirement savings fully included in income on the death of the last spouse
- CThe client's marginal rate while working, which determines how much of each dollar of premium is after-tax
- DProperty tax on the family home, which the survivors must keep paying for as long as they live there
Correct answer: B) The tax due on registered retirement savings fully included in income on the death of the last spouse
When the last surviving spouse dies, the full value of an RRSP or RRIF is generally included in income on the final return and taxed at the top marginal rate. Insurance provides the liquidity to pay that tax so the plan's value is not lost to the heirs.
Why the other options are wrong
- AConsumption taxes are not a death-triggered liability.
- CThe client's working marginal rate is not an exposure created by death.
- DProperty tax is a recurring living expense, not a tax triggered by death.
Exam tip
Registered plans (RRSP/RRIF) are fully taxable on the last spouse's death; that tax bill is a classic permanent insurance need.
Common mistake
Assuming registered savings pass to heirs untaxed.
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.