- (Topic 3)
Pierre-Marc, aged 32, is a dentist with a rich clientele. His income is substantial. Five years ago, he purchased an ??any occupation?? disability insurance policy. Today he meets with Joseph, his life insurance agent, to determine whether this type of coverage is still adequate. What should Joseph tell him?
Correct Answer:D
Comprehensive and Detailed Explanation:
??Any occupation?? disability insurance pays benefits only if the insured cannot work inanyjob for which they are reasonably suited by education, training, or experience. For a dentist like Pierre-Marc, whose substantial income relies on specialized skills, this is restrictive. ??Own occupation?? coverage pays if he cannot perform his specific job (dentistry), even if he can work elsewhere (Chapter 2:Insurance to Protect Income).
Option A: Incorrect; ??any occupation?? is less flexible, not more, and doesn??t pay if he can work elsewhere, regardless of choice.
Option B: Incorrect; benefits stop if he can work elsewhere, whether he chooses to or not. Option C: Incorrect; an AD&D rider addresses specific losses, not income replacement adequacy.
Option D: Correct; ??own occupation?? suits his high-income, specialized profession, ensuring benefits if he can??t practice dentistry, even if he takes another job.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 2:Insurance to Protect Income.
- (Topic 1)
Konrad is the owner of CrossBoy, a manufacturing company employing over 50 employees. Konrad recently took out a $500,000 loan to expand his business. Terrence works as a sales manager and is responsible for roughly 40% of the company??s revenue. Konrad recognizes the importance of Terrence's contributions to the success of the company. Therefore, in addition to a sizeable basesalary, CrossBoy also pays Terrence regular performance-based bonuses. Konrad understands that if Terrence dies prematurely, CrossBoy would suffer financially. What should he do to protect his company?
Correct Answer:C
Key person life insurance is designed to protect a business from financial losses resulting from the death of a key employee. In this case, Terrence??s role is crucial to CrossBoy??s success due to his substantial contribution to the company??s revenue. By purchasing key person insurance on Terrence, Konrad can ensure that the company has the necessary funds to cover the financial impact of Terrence??s potential loss. Other options, like offering a group life insurance plan (A), do not directly address the specific financial risk associated with the loss of a key employee.Therefore,Option Cis the appropriate choice.
- (Topic 3)
Denise, aged 52, is a nurse in a facility for seniors who can no longer live independently. She earns $45,000 a year, with a marginal tax rate of 38%. She has very little savings and is aware that, if she became unable to live independently herself, she could not afford the $4,500 a month it costs to live in a facility such as the one she works at. However, Denise recently learned that she could purchase affordable long-term care insurance. Taking the underwriting requirements into account, how much coverage should she take out?
Correct Answer:A
Comprehensive and Detailed Explanation:
Long-term care (LTC) insurance covers costs like assisted living facilities. Denise??s need is $4,500/month, and underwriting ensures coverage matches this expense (Chapter 4:Insurance to Protect Savings).
Net income: $45,000 ?? (1 - 0.38) = $27,900/year or $2,325/month. Option A: Correct; $4,500 matches her stated need.
Option B: Insufficient; $2,325 is her net income, not care cost. Option C: Arbitrary; doesn??t meet $4,500.
Option D: Insufficient; far below need.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 4:Insurance to Protect Savings.
- (Topic 2)
Frankie is a newly licensed insurance of persons agent who meets with Walter, her father's friend since college. Walter is in his late forties, and he mentions that he would like to purchase a life insurance policy and start planning for his retirement. Frankie has never sold a segregated fund before. Not wanting to disclose her inexperience, she clumsily fills out the application form to invest in segregated funds. Which responsibility did Frankie breach?
Correct Answer:B
By attempting to sell a segregated fund product without adequate knowledge or experience, Frankie breached her duty of competence. LLQP guidelines emphasize the importance of competence, requiring agents to have sufficient knowledge of the products they recommend to clients to ensure that they are acting in the client??s best interest. Frankie??s failure to disclose her inexperience could potentially lead to errors that might adversely affect Walter, highlighting her lack of preparation and professional responsibility.
- (Topic 3)
France is a daycare owner who has an employer group benefits plan in place for her employees. During her annual renewal meeting with her insurance agent, she is told that the plan??s rates are increasing by a surprisingly large percentage. Her agent explains that although most of her staff are young females in their 20s, the claims experience is higher than the industry norm. What amendment to the group plan could France??s agent suggest to help control the cost?
Correct Answer:C
Comprehensive and Detailed Explanation:
Adding deductibles and co-insurance shifts costs to employees, reducing claims and premiums (Chapter 8:Group Plan Specifics).
Option A: Limits coverage scope, not claims. Option B: Discriminatory; impractical.
Option C: Correct; effective cost control. Option D: Reduces value, not optimal.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 8:Group Plan Specifics.