LLQP Life Insurance · Component 1.1 · 35% of the exam
Which question about a client's assets most directly affects the estate's liquidity at death?
- AWhether the assets are insured against fire, since an uninsured loss would leave the estate unable to pay its debts
- Whether the assets are liquid, such as cash and securities, or fixed, such as real estate or a business
- CWhether the assets earn more than inflation, since a portfolio that loses real value cannot fund the estate's obligations
- DWhether the assets were inherited, since inherited property passes to the next generation without tax
Correct answer: B) Whether the assets are liquid, such as cash and securities, or fixed, such as real estate or a business
An estate rich in real estate or a private business may have no cash to pay taxes, debts and bequests. Liquidity — or its absence — is what determines whether insurance is needed to prevent a forced sale.
Why the other options are wrong
- AFire insurance protects the asset's value, not the estate's ability to pay taxes.
- CReturn relative to inflation matters for growth, not for liquidity at death.
- DWhether assets were inherited says nothing about whether they can be turned into cash.
Exam tip
An estate can be wealthy and illiquid at the same time. Insurance solves illiquidity, not poverty.
Common mistake
Assuming a high net worth removes the need for insurance.
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.