Which factors help assess the likelihood of a policy lapse due to rising premiums?

Which factors help assess the likelihood of a policy lapse due to rising premiums?

• A. Evaluate affordability, premiums, future income, and potential policy riders that increase cost; consider alternative product or rider options.
• B. Ignore future income and only consider current year affordability.
• C. Always recommend a term policy regardless of affordability.
• D. Assume lapse won't happen and proceed.

Answer: (A)

When evaluating the risk that a policy will lapse because premiums rise, focus on how the affordability picture unfolds over time. The best approach looks at the actual premium burden now and what it could become later, especially if riders or additional benefits increase the cost. It also considers the client’s expected future income and financial trajectory, since a premium that’s affordable today may become unsustainable as earnings change or costs rise. By weighing alternative product or rider options, you can identify ways to keep coverage affordable and reduce the chance of lapse (for example, adjusting coverage, choosing a less expensive rider, or selecting a cheaper product with a similar purpose). Relying only on current-year affordability misses future cost shifts; assuming lapse won’t happen ignores known financial pressures and is not prudent.

When evaluating the risk that a policy will lapse because premiums rise, focus on how the affordability picture unfolds over time. The best approach looks at the actual premium burden now and what it could become later, especially if riders or additional benefits increase the cost. It also considers the client’s expected future income and financial trajectory, since a premium that’s affordable today may become unsustainable as earnings change or costs rise. By weighing alternative product or rider options, you can identify ways to keep coverage affordable and reduce the chance of lapse (for example, adjusting coverage, choosing a less expensive rider, or selecting a cheaper product with a similar purpose). Relying only on current-year affordability misses future cost shifts; assuming lapse won’t happen ignores known financial pressures and is not prudent.