11.1 Presenting Needs-Analysis Findings and Choosing Term vs Permanent vs Group
Key Takeaways
- CISRO Life 3.2 starts by presenting the needs-analysis findings in client language: who is at risk, the gross capital need, which resources actually pay, the shortfall, and whether each slice is time-limited or permanent — before any product name.
- Life insurance can suitably fund income replacement, estate liquidity, charitable bequests, estate equalization, support for children including education, lifetime support of a spouse or special-needs dependent, and buy-sell or other business needs.
- Choose a category first: individual term for dated risks and tight cash flow, permanent (whole life, Term-100, or universal life) for needs that remain whenever death occurs, and group only as a membership layer the sponsor can change or end.
- Identify a specific product inside that category — Term 20 versus Term 30, participating whole life versus Term-100 versus UL, basic versus optional group — using duration, cash-value need, ownership, and who controls the contract.
- Scenarios and illustrations help the client compare guaranteed versus non-guaranteed values; they are not the contract, not a rate guarantee, and not a licence to alter the insurer’s software.
Quick Answer: Sub-component 3.2 Propose a recommendation adapted to the client’s needs and situation is 25% of the Life sitting together with underwriting and implementation. First present the needs-analysis findings. Then match each need to a life-insurance purpose, choose term versus permanent versus group, pick a specific product inside that category, and use scenarios or illustrations only as comparison tools with disclosed limits.
This independent OpenExamPrep chapter helps learners study CISRO Life competency 3.2. It is not legal, tax, or insurance advice, and it does not claim official approval by CISRO, a provincial regulator, or a course provider. Product mechanics for term, whole life, Term-100, universal life, group, riders, and business contracts were taught in earlier chapters. Here you synthesize them into how to choose.
Underwriting (3.1) already asked whether the file can be placed. Implementation (3.3) will ask how to apply, illustrate, and deliver. 3.2 sits in the middle: what you actually propose, and how you say it, after the fact-find and the product analysis.
How to present the findings from the needs analysis
CISRO’s first 3.2 bullet is how to present the findings from the needs analysis. Presentation is not a second spreadsheet. It is a client-facing restatement of Chapters 4 and 5 so the people in the room can correct you before you attach a product.
A defensible presentation order on this exam:
- Restate whose lives you modelled and the death event. “If Tomasz dies while Anika, Sofia, Leila, Marek, Nadia, and Irena still depend on his earnings or care…” is a finding. “I like Term 20” is not.
- Show the dollar trail: gross capital need, resources that will actually arrive, coverage shortfall, and duration of each slice.
- Separate households and purposes so one cheque does not steal another. Nadia’s court-ordered capital is not Anika’s mortgage fund.
- Invite correction. Mortgage-clear versus keep-and-fund, a different charitable amount, or a missed dependent changes the shortfall. CISRO later lists adjustments to a recommendation based on client input on the Accident and Sickness 3.2 table; Life 3.2 still expects you to present findings so the client can react.
- Only then name a category and a product. Product-first presentations are how candidates skip the 35% Assess weight and fail a 3.2 stem.
Tomasz Kowalski, age 45, using the Chapter 4 capital-needs file:
| Finding you must say out loud | Number on this file |
|---|---|
| Gross capital needs if Tomasz dies | $1,330,400 |
| Resources that actually pay those needs | $641,500 |
| New-coverage shortfall | about $689,000 |
| Anika’s household shortfall (dated: mortgage years, 18-year income fund, education) | about $589,000, of which $25,000 is a death-time Heart & Stroke gift |
| Nadia’s remaining court-ordered insurance | $100,000 more, with her as irrevocable beneficiary |
| Group life at the manufacturer | $142,000 (1× salary), ends if he leaves, optional group was declined |
| Existing 2019 individual term | $250,000, of which $100,000 is already Nadia’s |
| Household premium room | about $900 a month of apparent surplus that already funds RESP and RRSP deposits |
Say what the numbers mean. If Tomasz dies tomorrow, Anika still has a municipal salary, a Mississauga rental, and joint cash, but she does not have $689,000 of dedicated death benefit. Group life is a resource, not a recommendation, because the sponsor can change or terminate it and because Tomasz’s aviation hobby and a job change can both erase it. Anika’s own death is a separate worksheet you must not bury: she has $236,000 of group life and no individual policy.
Do not present a participating-whole-life illustration as if it were the needs analysis. The illustration answers “what might this contract look like if assumptions hold.” The findings answer “how many dollars, to whom, for how long.”
Needs that can suitably be met with life insurance
CISRO lists the purposes. Your exam skill is to map each purpose to a duration and a payee, then choose a category. Life insurance is suitable when a death must produce cash. It is not a substitute for disability income, emergency savings, or a segregated-fund guarantee.
| Official purpose | What the death cheque is for | Typical duration | Category instinct (not yet a product name) |
|---|---|---|---|
| Income replacement | Replace the deceased’s net contribution so survivors keep housing, food, and care | Years until children are independent, until a spouse retires, or for life | Term for a dated earning period; permanent if a survivor will never be self-supporting |
| Estate liquidity (final expenses, tax liabilities, debt elimination) | Cash for funeral, CRA on a deemed disposition, and debts the family wants cleared | Final expenses and tax at death are whenever death occurs; a 23-year mortgage is dated | Permanent (or a permanent slice) for tax/funeral; term for an amortizing loan |
| Charitable bequests | Fund a stated gift to a registered charity at death | Permanent — the gift is meant to be paid whenever death occurs | Small permanent face, or a named-charity beneficiary on a slice of a larger policy |
| Estate equalization | Cash so one child can keep the cottage or the company while another receives equivalent value | Whenever death occurs, often after the first spouse’s rollover has already been used | Permanent, often with a named-child beneficiary or a corporate-owned design |
| Support for children, including education | Living costs plus RESP-top-up or tuition capital | Dated until a stated age (Sofia to 22 is 18 years) | Term matching those years; keep RESP as an earmarked resource, not as a reason to drop the line |
| Lifetime support of a spouse or special-needs dependent | Income after the working years and after the other parent’s death (Irena; a disabled adult child) | Permanent | Permanent chassis, often with a trustee beneficiary |
| Funding a buy-sell or other business needs | Cash so the legal buyer can complete a share or unit purchase, replace a key person, or repay a bank | Dated if the loan or project ends; lifetime if owners will die still holding shares | Term for a known window; permanent when death at 80 must still fund the purchase; owner and beneficiary must match the buyer |
Leah Nguyen’s cottage and private-company shares (Chapter 5) are estate liquidity and, if two children inherit uneven assets, equalization. Northline Precision Ltd.’s $1,200,000 per life is a buy-sell need, not income replacement for Amira’s household. Mixing those labels is how a candidate puts the corporation as beneficiary of a personal income-replacement policy, or Anika as beneficiary of a share-redemption policy.
How to choose the most appropriate life insurance category
CISRO asks you to choose the category before you fall in love with a carrier illustration. On this module the working categories are individual term, individual permanent (the trio: whole life, Term-100, universal life), and group. Riders customize a chassis; they are not a fourth category. Business ownership (personal versus corporate) is a contract and tax overlay on the same three chassis.
Ask four questions in order:
- Will this need still exist if the life insured dies at 85? If no, you are in term territory for that slice. If yes, you are in permanent territory for that slice.
- Can the household or the company pay a permanent premium for the required face without lapsing? If no, do not “solve” a $689,000 lifetime need with $80,000 of whole life and silence. Fund the dated block with term; fund only the true lifetime slice with permanent; write any residual risk the client accepts.
- Does anyone need cash value, premium offset, or an investment account while alive? If no, Term-100 can be the cheaper permanent duration. If yes, whole life (bundled reserve, possible participating dividends) or UL (unbundled deposits, YRT versus LCOI, exempt-test room) — details already taught; here you only select.
- Is the client a member of a group that already provides basic life, and is that group the client you were retained to advise? Group is a layer. It is appropriate as existing coverage and as a workplace default. It is not the most appropriate category for a personal shortfall the employer can cancel, for a court-ordered irrevocable designation the HR portal cannot host, or for a buy-sell the corporation must own.
| If the file shows… | Most appropriate category | Trap |
|---|---|---|
| $564,000 of Anika’s remaining dated need (mortgage, 18-year income, education) and ~$900 of contested monthly surplus | Individual term — large face she can actually keep in force | Replacing the whole $689,000 with participating whole life she will lapse |
| $25,000 Heart & Stroke gift meant to be paid whenever Tomasz dies | Individual permanent (small T-100 or whole life, or a permanent slice) | 20-year term that can expire while he is still alive and still wants the gift |
| $100,000 remaining for Nadia under an Ontario order | Individual term (or a term rider) with Nadia irrevocable | Putting Nadia as a revocable share of Anika’s family policy |
| Anika’s City of Edmonton basic group life | Group as a resource and a layer, not as the recommendation that closes her own shortfall | Treating $236,000 of sponsor-controlled coverage as lifetime individual insurance |
| Amira and Benoit still working, company FMV can change, both healthy | Individual policies owned to match the buy-sell, often term while they are building, permanent if they will die as owners | One personally owned family policy “that the company can use” |
| Harbourview’s 24-month recruiting gap plus a $500,000 assigned loan | Term sized so the residual after the bank still funds recruiting | One $500,000 policy that pays only the bank |
Group versus individual is a control test. The sponsor is the group policyholder. The member holds a certificate. Conversion on leaving, if any, is a limited-time individual contract at individual rates, not a continuation of the group price. Recommend keeping basic group and adding individual coverage for the shortfall. Do not recommend dropping individual term “because work has life insurance,” and do not recommend the employee as owner of the master contract.
How to identify specific products within that category
Once the category is right, CISRO wants a specific product, not “some insurance.”
Inside term. Choose a level term whose initial period covers the dated risk (Term 20 or Term 30 for Sofia’s dependency and a 23-year mortgage is closer than Term 10). Prefer renewable and convertible when cash flow is tight but a lifetime slice is already visible, or when Tomasz’s aviation hobby and extra-premium risk make future insurability uncertain. Decreasing term can track a mortgage but usually fails income replacement that does not decrease on the same schedule. Increasing term is a niche inflation tool, not the default. Lender creditor life is a different, often declining, product with claim-time underwriting — rarely the “most appropriate” individual recommendation when the client can own a convertible term policy.
Inside permanent. Participating whole life if the owner wants bundled guarantees plus a dividend option (cash, premium reduction, accumulation, paid-up additions, or term). Non-participating whole life if they want guarantees without dividend-scale risk. Limited-pay whole life if cash flow is high now and they want to finish paying. Term-100 if they want lifetime death benefit, typically level premiums, and little or no cash surrender value. Universal life if they need flexible deposits, a chosen cost-of-insurance pattern (YRT versus LCOI), and an exempt accumulating fund — and they will monitor it. UL is the wrong specific product for a client who asked only to replace 18 years of income on $90 of spare cash.
Inside group. Name basic versus optional employee life, dependent life, survivor income, and AD&D as separate certificates or riders. Optional group that was declined is not a product you can recommend into existence. Dependent life does not replace Tomasz’s human capital.
Business overlay. Cross-purchase: surviving owner is owner and beneficiary (personal term or permanent on the co-owner). Share redemption or typical key-person: corporation is owner and beneficiary. Split-dollar / shared ownership only when two parties should split death benefit and cash value — not as a default family sale.
Worked close for Tomasz (category only; the package is the next section). Present the $689,000 shortfall. Recommend convertible level term as the category for Anika’s dated block and for Nadia’s remaining $100,000. Recommend a small permanent category for the $25,000 charitable (and any funeral slice you split out as lifetime). Recommend keeping manufacturer group as a layer, not as the plan. Diary a conversion or a permanent add-on if cash flow later supports it, because Irena’s care and the Heart & Stroke gift do not expire with a Term 20. Do not open a max-funded UL illustration as the first sentence of this meeting.
Purpose and limitations of scenarios or illustrations
CISRO’s last process bullet is the purpose and limitations of using scenarios or illustrations to help the client compare products. Industry illustration practice for Canadian life insurance is reflected in CLHIA Guideline G6 (life insurance illustrations): the purpose is to inform, not to close a sale by implying that non-guaranteed values are guaranteed.
Purpose. A scenario or illustration lets the client compare two or more designs at the same age, sex, smoking status, and face amount: year-1 premium, guaranteed cash values (if any), whether the death benefit is level, and — if non-guaranteed elements appear — what happens if experience is worse. It is how you show why Term 20 is cheaper than participating whole life for $600,000, and why a dividend-scale “premium offset in year 18” is not a contractual holiday.
Limitations you must be able to state:
- An illustration is not the policy. The contract, plus any signed illustration the insurer requires at issue, controls.
- Guaranteed values are contractual. Non-guaranteed values (participating dividends, UL account returns, current YRT scales that are not guaranteed) must be labelled as such and must not be described as guaranteed.
- Where non-guaranteed amounts are shown, G6-style practice is to show at least two scenarios: a primary scenario and a less favourable one. A single rosy UL return is an incomplete comparison.
- Assumptions (investment return, dividend scale, mortality, expenses, tax, lapse) can change. A scale reduction can postpone premium offset. Poor UL returns can lapse the policy.
- Modal factor (monthly versus annual) changes the dollars the client pays; an annual illustration is not a monthly PAD quote.
- You must not alter the insurer’s illustration software past its parameters or rewrite guaranteed columns. CLHIA Guideline G8 treats unauthorized illustration changes as an advisor-suitability problem.
- Illustrations do not underwrite aviation, do not create group conversion rights, and do not fix a wrong beneficiary.
Use a needs scenario (“if death in year 3 versus year 25”) to test duration. Use a product illustration only after the category is chosen, to compare two products that already fit. If the client wants the illustration’s year-20 cash value more than the death benefit, you are no longer recommending life insurance for a death need — stop and re-open the fact-find.
You have finished the Kowalski–Patel capital-needs worksheet: gross need $1,330,400, resources $641,500, shortfall about $689,000. What is the correct first move under CISRO Life 3.2 when you sit down to propose coverage?
Anika’s remaining dated need is about $564,000, Nadia still needs $100,000 of irrevocable coverage, and Tomasz wants a $25,000 charitable gift paid whenever he dies. Household cash flow cannot support participating whole life on the full $689,000. Which category choice best matches CISRO 3.2?
What is a correct statement of the purpose and limitations of life insurance illustrations when helping a client compare products on the Life module?