LLQP Needs Analysis and Financial Planning 4

Question 1

A 45-year-old client has a mortgage of $320,000, a car loan of $18,000, and no other debts. Her spouse earns $75,000/year and would need income replacement for 15 years. Using the DIME method, what component accounts for the mortgage balance?

Accepted Answer

Debt elimination

Answer

In the DIME method, Debt refers to all outstanding liabilities including the mortgage balance.

Question 2

Which of the following best describes a 'human life value' approach to determining life insurance needs?

Accepted Answer

Calculating the present value of the insured's future net earnings

Answer

The human life value method discounts the insured's projected future net earnings to a present value to determine the economic loss survivors would suffer.

Question 3

A client wants to ensure his family can maintain their current lifestyle if he dies. After reviewing his financial data, the advisor determines existing assets and survivor income cover 60% of the need. The advisor should recommend a death benefit that covers:

Accepted Answer

The remaining 40% gap

Answer

The needs analysis identifies the shortfall between the total financial need and existing resources, so insurance should cover only the gap.

Question 4

During a needs analysis, a client discloses she is a single parent with two children aged 8 and 10. Which financial planning priority is typically MOST urgent for this client?

Accepted Answer

Income replacement life insurance

Answer

A single parent's top priority is ensuring income replacement so dependents are financially protected if the parent dies prematurely.

Question 5

When gathering financial data for a needs analysis, an advisor learns the client has a defined benefit pension that pays a survivor benefit of $1,200/month. How should this be treated in the analysis?

Accepted Answer

Added to existing resources that reduce the life insurance need

Answer

Survivor pension benefits represent existing resources that reduce the gap between total needs and what insurance must cover.

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Practice Test

LLQP Needs Analysis and Financial Planning 4