LLQP Module 1 (Ethics & Professional
Practice)
According to provincial insurance legislation, what is considered the minimum age for
individuals to have the capacity to contract for insurance on their own behalf? - ANS-16
years
Provincial insurance legislation says that, for contracting a policy, a person 16 years of age
or older has the capacity to contract for insurance on its own behalf.
(Refer to Section 1.2.3)
Adjusted Cost Basis (ACB) calculation formula. - ANS-Net Cost (sum of policy premiums
paid) - NCPI (Net Cost of Pure Insurance) = ACB
NCPI = Net Cost of Pure Insurance
All insurance contracts are unilateral contracts. What does this mean? - ANS-This means
that the insurance company is the only party bound by the contract and is obliged to fulfill the
contract, as long as premiums are paid, whereas the insured can cancel it at any time.
(Refer to Section 2.3.2)
Andreas went into a financial institution to take out a loan to purchase a car.
The financial institution insisted that he purchase a life policy to insure the loan.
Identify the professional standard that the financial institution has violated. - ANS-Tied
selling.
(Refer to Section 4.2.3.1)
Are the life insurance death benefit proceeds made out to the beneficiary protected against
creditors? - ANS-When an individual dies, the estate must pay the debts and taxes owed by
the deceased.
If the estate does not have enough assets to pay debts, the persons named in the WILL will
not receive anything.
HOWEVER, the provincial insurance legislation states that insurance proceeds payable to
beneficiaries do not form part of the insured's estate. So they are not subject to control by
the estate's creditors.
Are the OAS pension benefits and GIS considered taxable income? - ANS-OAS pension
benefits are taxable, while GIS is non-taxable (a supplement to those already receiving the
OAS)
Assuris is a not-for-profit organization that protects Canadian policyholders if their life
insurance company should fail. How does Assuris provide protection for insurance
policyholders? - ANS-If a member insurance company becomes insolvent, Assuris facilitates
the transfer of its policies to a solvent company and ensures benefits are continued under
the original terms of the policy.
, Assuris provides protection for how much of the Accumulated value? - ANS-100% up to
$100,000
Assuris provides protection for how much of the Cash value ? - ANS-$60,000 or 85% of
promised benefits, whichever is higher
Assuris provides protection for how much of the death benefit? - ANS-Death benefit
$200,000 or 85% of promised benefits, whichever is higher
Assuris provides protection for how much of the Health expense ? - ANS-$60,000 or 85% of
promised benefits, whichever is higher
Assuris provides protection for how much of the Monthly income (including annuties)? -
ANS-$2,000/month or 85% of promised benefits, whichever is higher
At what time should a Life Insurance Replacement Declaration form (LIRD) be reviewed and
completed when replacing an existing contract? - ANS-The LIRD should be completed,
reviewed and a copy left with a client prior to the actual replacement of the insurance policy
or rider.
Civil fault is an action or omission which causes someone loss or harm for which the
wrongdoer is liable. A breach of the privacy obligations of an agent could lead to a civil
action against the agent in torts. A client claiming to be the victim of civil wrongdoing could
initiate civil litigation against an agent. How can insurance agents protect themselves against
a claim against them under tort law? - ANS-Life insurance agents protect themselves from
claims by carrying errors and omissions (E&O) insurance.
Note: E&O insurance does not protect agents from intentional acts, misappropriations, fraud,
or criminal activities such as forgery.
(Refer to Section 4.2.5.1)
Dallas and Brendan both work for ABC Financial; Dallas works on the investment side and
Brendan works in insurance.
Dallas and Brendan have a mutual client, Damien.
Damien recently met with Brendan to purchase term insurance. He requested term
insurance because he said that he was not able to afford high premiums.
Brendan perceived Damien as someone who made a lot of money. He decided to
double-check with Dallas on Damien's income, and assets.
Would Dallas be in violation of a professional standard if he provided Brendan with this
information? If so, which one? - ANS-Dallas would be violating privacy and confidentiality
standards if he provided this information to Brendan.
(Refer to Section 4.1.4.1)
Define CSV - ANS-Cash Surrender Value: the amount of money you might receive if you
decide to cancel your life insurance policy.
(But it's not available with all life insurance policies. Cash surrender value is usually only a
part of universal life, and whole life--not term life)
Denise is an insurance agent and her sales are low this year.
Practice)
According to provincial insurance legislation, what is considered the minimum age for
individuals to have the capacity to contract for insurance on their own behalf? - ANS-16
years
Provincial insurance legislation says that, for contracting a policy, a person 16 years of age
or older has the capacity to contract for insurance on its own behalf.
(Refer to Section 1.2.3)
Adjusted Cost Basis (ACB) calculation formula. - ANS-Net Cost (sum of policy premiums
paid) - NCPI (Net Cost of Pure Insurance) = ACB
NCPI = Net Cost of Pure Insurance
All insurance contracts are unilateral contracts. What does this mean? - ANS-This means
that the insurance company is the only party bound by the contract and is obliged to fulfill the
contract, as long as premiums are paid, whereas the insured can cancel it at any time.
(Refer to Section 2.3.2)
Andreas went into a financial institution to take out a loan to purchase a car.
The financial institution insisted that he purchase a life policy to insure the loan.
Identify the professional standard that the financial institution has violated. - ANS-Tied
selling.
(Refer to Section 4.2.3.1)
Are the life insurance death benefit proceeds made out to the beneficiary protected against
creditors? - ANS-When an individual dies, the estate must pay the debts and taxes owed by
the deceased.
If the estate does not have enough assets to pay debts, the persons named in the WILL will
not receive anything.
HOWEVER, the provincial insurance legislation states that insurance proceeds payable to
beneficiaries do not form part of the insured's estate. So they are not subject to control by
the estate's creditors.
Are the OAS pension benefits and GIS considered taxable income? - ANS-OAS pension
benefits are taxable, while GIS is non-taxable (a supplement to those already receiving the
OAS)
Assuris is a not-for-profit organization that protects Canadian policyholders if their life
insurance company should fail. How does Assuris provide protection for insurance
policyholders? - ANS-If a member insurance company becomes insolvent, Assuris facilitates
the transfer of its policies to a solvent company and ensures benefits are continued under
the original terms of the policy.
, Assuris provides protection for how much of the Accumulated value? - ANS-100% up to
$100,000
Assuris provides protection for how much of the Cash value ? - ANS-$60,000 or 85% of
promised benefits, whichever is higher
Assuris provides protection for how much of the death benefit? - ANS-Death benefit
$200,000 or 85% of promised benefits, whichever is higher
Assuris provides protection for how much of the Health expense ? - ANS-$60,000 or 85% of
promised benefits, whichever is higher
Assuris provides protection for how much of the Monthly income (including annuties)? -
ANS-$2,000/month or 85% of promised benefits, whichever is higher
At what time should a Life Insurance Replacement Declaration form (LIRD) be reviewed and
completed when replacing an existing contract? - ANS-The LIRD should be completed,
reviewed and a copy left with a client prior to the actual replacement of the insurance policy
or rider.
Civil fault is an action or omission which causes someone loss or harm for which the
wrongdoer is liable. A breach of the privacy obligations of an agent could lead to a civil
action against the agent in torts. A client claiming to be the victim of civil wrongdoing could
initiate civil litigation against an agent. How can insurance agents protect themselves against
a claim against them under tort law? - ANS-Life insurance agents protect themselves from
claims by carrying errors and omissions (E&O) insurance.
Note: E&O insurance does not protect agents from intentional acts, misappropriations, fraud,
or criminal activities such as forgery.
(Refer to Section 4.2.5.1)
Dallas and Brendan both work for ABC Financial; Dallas works on the investment side and
Brendan works in insurance.
Dallas and Brendan have a mutual client, Damien.
Damien recently met with Brendan to purchase term insurance. He requested term
insurance because he said that he was not able to afford high premiums.
Brendan perceived Damien as someone who made a lot of money. He decided to
double-check with Dallas on Damien's income, and assets.
Would Dallas be in violation of a professional standard if he provided Brendan with this
information? If so, which one? - ANS-Dallas would be violating privacy and confidentiality
standards if he provided this information to Brendan.
(Refer to Section 4.1.4.1)
Define CSV - ANS-Cash Surrender Value: the amount of money you might receive if you
decide to cancel your life insurance policy.
(But it's not available with all life insurance policies. Cash surrender value is usually only a
part of universal life, and whole life--not term life)
Denise is an insurance agent and her sales are low this year.
