LLQP Needs Analysis and Financial Planning 2

Question 1

Which of the following best describes the 'income replacement ratio' used in retirement planning needs analysis?

Accepted Answer

The percentage of pre-retirement income needed to maintain lifestyle in retirement

Answer

The income replacement ratio is the percentage of pre-retirement income a retiree needs to maintain their standard of living, commonly estimated at 70–80%.

Question 2

When analyzing estate conservation needs, a financial advisor is primarily concerned with:

Accepted Answer

Ensuring sufficient assets remain after taxes and settlement costs to transfer to heirs

Answer

Estate conservation planning uses insurance to offset taxes and estate settlement costs so that wealth intended for heirs is not eroded.

Question 3

What makes inflation an important consideration in a life insurance needs analysis?

Accepted Answer

It erodes the purchasing power of a fixed death benefit over time

Answer

Inflation reduces the real value of a fixed death benefit, meaning coverage that seems adequate today may be insufficient to meet future obligations.

Question 4

Which of the following represents a 'final expense' need in a life insurance needs analysis?

Accepted Answer

Funeral costs and estate administration expenses

Answer

Final expenses include funeral and burial costs, outstanding medical bills, and probate or estate administration fees that arise immediately at death.

Question 5

A single parent with two young children would have which need identified as MOST critical in a life insurance needs analysis?

Accepted Answer

Income replacement and ongoing childcare coverage for dependents

Answer

For a single parent, replacing lost income and funding children's care and education are the most critical insurance needs because dependents rely entirely on that one earner.

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Practice Test

LLQP Needs Analysis and Financial Planning 2