LLQP MODULES PRACTICE
TEST CANADA 130
QUESTIONS
Question 1: Maya earns $96,000 a year and is the sole income earner for her family.Her spouse would need $54,000 a year for 10 years if Maya died. The family has $140,000 of liquid assets earmarked for this need and Maya has $100,000 of group life insurance. Ignoring investment returns, what additional life insurance is required for this income-replacement need?
Choices:
1) $300,000
2) $400,000
3) $440,000
4) $540,000
Correct Answer: $300,000
Explanation: The 10-year need is $54,000 × 10 = $540,000. Available liquid assets and group life insurance total $240,000, so the shortfall is $540,000 − $240,000 = $300,000.Page 1
Question 2: Noah has a $360,000 mortgage, estimated �nal expenses of $20,000, and a goal of leaving $80,000 for his child's education. He has $150,000 of existing life insurance and $40,000 in non-registered savings that could be used at death.What is his approximate additional capital need?
Choices:
1) $230,000
2) $270,000
3) $310,000
4) $460,000
Correct Answer: $270,000
Explanation: Total capital needs are $360,000 + $20,000 + $80,000 = $460,000. Existing insurance and available savings total $190,000, leaving a $270,000 shortfall.Question 3: A client has no dependants and su�cient assets to pay all debts, but owns a cottage with a large accrued gain that is expected to create tax and estate- liquidity costs at death. Which need is most directly identi�ed?
Choices:
1) Income replacement 2) Estate liquidity 3) Disability income replacement 4) Emergency savings
Correct Answer: Estate liquidity
Explanation: Life insurance can be used to create liquidity at death for taxes, debts, �nal expenses, and other estate obligations. The client does not have an income-replacement need based on the facts given.Page 2
Question 4: A corporation relies heavily on one engineer whose specialized
knowledge generates a large share of company revenue. Which �nancial risk should be addressed �rst in a life insurance needs analysis?
Choices:
1) Loss caused by the engineer's death 2) A decline in the market value of the corporation's building 3) Employee dental claims 4) The owner's personal mortgage renewal
Correct Answer: Loss caused by the engineer's death
Explanation: The death of a key employee can cause lost revenue, recruitment costs, and operational disruption. Key person life insurance is designed to address that business risk.Question 5: Two shareholders have agreed that if either dies, the survivor will buy the deceased shareholder's interest from the estate. What insurance need does this arrangement create?
Choices:
1) Funding a buy-sell agreement 2) Replacing employee health bene�ts 3) Funding a group RRSP 4) Covering the corporation's inventory
Correct Answer: Funding a buy-sell agreement
Explanation: A buy-sell agreement creates a need for capital at a shareholder's death so the surviving owner or corporation can acquire the deceased owner's interest.Page 3