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ETHICS (OFFICIAL LLQP) > CHAPTER 1 (Legal Framework Governing Life Insurance) > Flashcards

CHAPTER 1 (Legal Framework Governing Life Insurance) Flashcards

1
Q

DISCLAIMER

A

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2
Q

Ethics Terminology

Life insurance

A

Insurance policy that covers the risk of one or more persons dying.

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3
Q

Ethics Terminology

Accident & Sickness insurance

A

Insurance policy that cover loss of health

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4
Q

Ethics Terminology

Life Insured

A

The person who the life insurance contract is based on (Policyholders can also be the life insured.)

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5
Q

Ethics Terminology

Beneficiary

A

The person or entity you name in a life insurance policy to receive the death benefit

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6
Q

Chapter 1

In regards to ethics and professional practice, In law, a relationship of delegated authority is called____ ?

The individuals in that role are called____ ?

And the person, or corporation, delegating the authority is called ______ ?

A

In law, a relationship of delegated authority is called “agency”, and the individuals in that role are called “agents”.

The person, or corporation, delegating the authority is called “the principal”

[Ref. 1.1.4]

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7
Q

What are the two types of agents?

A
  1. Independent Agents
  2. Captive Agents
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8
Q

TRUE OR FALSE?

Designated actuaries must belong to the Canadian Institute of Actuaries, and they must conform to its practices and processes.

A

TRUE

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9
Q

Ethics Terminology

Independent agent

A
  • Independent agents are contractors with two or more insurers.
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10
Q

Ethics Terminology

Captive agent

A

Captive agents are single employees of a specific insurance company and only sells that company’s products in return for commission.

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11
Q

TRUE OR FALSE?

Ownership of family property is subject to unprotected division when the married spousal relationship breaks down, but subject to a judge’s discretion.

A

FALSE

Ownership of family property is presumed subject to equal division when the married spousal relationship breaks down, but subject to a judge’s discretion.

It is crucial for agents to understand that the property rights of married spouses usually differ significantly from those of common law spouses when their relationship breaks down. Common law status (no presumed division) is different from married status (presumed division)

[Ref. 1.2.6.1]

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12
Q

What is the difference between Inter-vivos trust and Testamentary trust?

A

Trusts established during life of the settlor are called “inter-vivos” trusts (between living people).

Trusts established upon, and as a consequence of, someone’s death are called “testamentary” trusts.

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13
Q

A managing general agent (MGA) facilitates business between agents, their clients, and insurers.

Name at least three services that MGA provides.

A
  • Supporting and assisting an agent in obtaining contracts with insurers, which can include granting authority to an agent to act on behalf of an insurer;
  • Processing and tracking agents’ business submitted by an agent;
  • Providing agents with direct sales support;
  • Facilitating the two-way flow of information between the insurer and the agent;
  • Pooling of commission payments for the agent from various insurers;
  • Facilitating the submission of completed contracting requirements between an agent and an
    insurer;
  • Training agents;
  • Providing market conduct compliance supports to insurers;
  • Developing products and/or assisting in the adjusting of claims on behalf of an insurer.
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14
Q

TRUE OR FALSE?

An insurance agency is either a corporation or a partnership that holds a license from a regulator or several regulators.

A

TRUE

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15
Q

TRUE OR FALSE?

An insurance agency must have at least one licenced insurance agent for the same category of insurance for which the insurance agency holds a licence.

A

TRUE

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16
Q

TRUE OR FALSE?

While each province has its own legislation, the provinces and territories have all based their respective insurance legislation on a model statute created in the 1920’s in cooperation with a body called the “Statutory Civil Conference.”

A

FALSE

While each province has its own legislation, the provinces and territories have all based their respective insurance legislation on a model statute created in the 1920’s in cooperation with a body called the “Uniform Law Conference.”

  • This is why the insurance legislation applicable in every Canadian jurisdiction (except Québec) is very similar.

[Ref.1.2]

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17
Q

TRUE OR FALSE?

If a policyholder moves to another province after the policy is issued, that province’s laws will apply to certain aspects of their estate planning, such as their will.

A

TRUE

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18
Q

The relevant legal principles that arise from Common Law or from statutory law (statutes) are addressed in a particular order, what are they? Name Some

A
  • Capacity and status of persons;
  • Natural persons, partnerships and legal persons (corporations);
  • Minors and guardians;
  • Powers of attorney (PoA);
  • Marriage and common law unions;
  • Divorce and separation;
  • Wills, estates and successions;
  • Trusts and trustees;
  • Bankruptcy.

[Ref. 1.2.1]

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19
Q

Explain “Legal capacity”

A

The capacity to enter into a contract means the individual is capable of understanding the terms of the contract, and that they are entering into a binding agreement, even if they do not know all the details.

  • (1) A person who is eighteen years of age or more is presumed to be capable of entering into a contract.
  • (2) A person who is sixteen years of age or more is presumed to be capable of giving or refusing consent in connection with his or her own personal care.

[Ref. 1.2.1]

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20
Q

Insurance companies issue policies based on age, gender, health and other factors, does that mean they are permitted to discriminate?

A

YES

Insurance companies are permitted to discriminate in providing insurance coverage as long as they can justify it on reasonable and bona fide grounds.

[Ref 1.5.2]

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21
Q

TRUE OR FALSE?

100-year-old person is NOT presumed by law to have the legal capacity to enter into a contract.

A

FALSE

100-year-old person is still presumed by law to have the legal capacity to enter into a contract.

[Ref. 1.2.1]

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22
Q

TRUE OR FALSE?

A natural person with legal
capacity has the ability to make decisions about their person and property and to bear the risks and rewards of those decisions.

A

TRUE

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23
Q

TRUE OR FALSE?

A partnership is an arrangement between only two parties carrying on business together with a view to making a profit.

A

FALSE

A partnership is an arrangement between two or more parties carrying on business together with a view to making a profit.

[Ref. 1.2.2.2]

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24
Q

TRUE OR FALSE?

Business corporations are owned by shareholders, who can be either individuals, other corporations, or partnerships.

A

TRUE

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25
Q

TRUE OR FALSE?

Provincial insurance legislation says that, for contracting a policy (but not as a beneficiary receiving death benefits), a person 16 years of age or older has the capacity to contract for insurance on its own behalf.

A

TRUE

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26
Q

TRUE OR FALSE?

Parents of minors aged 15 and under have an insurable interest in their children and may apply for a life sentence insurance policy in their name.

A

TRUE

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27
Q

A court-appointed guardian is important in insurance practice for two main reasons, what are they?

A
    1. if a death benefit is payable to a minor, the guardian may be entitled to accept the payment and discharge
      the insurer from its obligations under the contract.
    1. if insurance is being applied for on behalf of a minor as the life insured, and there is no parent, it may be the guardian who will be answering questions on behalf of young minors and completing the application.
28
Q

What happens If the minor has no guardian or person capable of giving and authorized to give a valid discharge to the insurer for the insurance money?

A

The insurer shall, within 30 days after receiving the evidence required, pay the money and any applicable interest into court to the credit of the minor.

  • In that case, the money will be managed by an official connected with the Public Trustee, if there is no trustee, or court-appointed guardian to receive it.

[Ref.1.2.3]

29
Q

What is the difference between the power of attorney and enduring power of attorney?

A
  • A power of attorney is a legal document made by one person who appoints another person, called an “attorney,” to deal with the business and property of another person and to make financial and legal decisions on their behalf.
  • An enduring power of attorney will continue even if the principal becomes mentally incapable of making decisions.

[Ref. 1.2.4.2]

30
Q

The power of attorney, by statute, usually has all the powers required to deal with the owner’s property, except….

A

The power of attorney, by statute, usually has all the powers required to deal with the owner’s property, except making a will.

31
Q

Clients may or may not have a valid will when they die. If they do, they are said to have died “testate” – with a will. If there is no will, the client is said to have died “________”

A

If there is no will, the client is said to have died “intestate.”

32
Q

TRUE OR FALSE?

When there is no will, the estate trustee will
distribute the estate in accordance with the applicable provincial rules on intestacy.

A

TRUE

33
Q

TRUE OR FALSE?

If clients wish to disinherit a former
legal spouse (marriage) after separation, they need to get a divorce and keep their will and their beneficiary designations the same.

A

FALSE

If clients wish to disinherit a former
legal spouse (marriage) after separation, they need to change their will and their beneficiary designations, and sign a separation agreement (Ontario Law except Quebec).

[Ref. 1.2.7.1]

34
Q

TRUE OR FALSE?

A will made before marriage cannot be revoked upon marriage, even if the will was made with the marriage in mind.

A

FALSE

A will made before marriage is automatically revoked upon marriage, unless the will was made with the marriage in mind (with a statement making reference to the upcoming marriage and the name of the spouse)

[Ref. 1.2.7.1]

35
Q

TRUE OR FALSE?

If a policyholder’s beneficiary designations contained in a will are revoked, and there is no valid beneficiary designation, the insurance or registered plan proceeds will become payable to the notary public courts.

A

FALSE

If a policyholder’s beneficiary designations contained in a will are revoked, and there is no valid beneficiary designation, the insurance or registered plan proceeds will become payable to the policyholder’s estate.

36
Q

TRUE OR FALSE?

When the policyholder dies without a will, the estate will be distributed according to the provincial law that determines who inherits on intestacy.

A

TRUE

37
Q

Trusts established during life of the settlor are called_______ ?

A

Trusts established during life of the settlor are called “inter-vivos” trusts (between living people).

38
Q

TRUE OR FALSE?

Guardians and powers of attorney take title to the person’s property.

A

FALSE

While guardians and powers of attorney have certain powers over a person’s property, they do not take title to the property.

[Ref.1.2.8]

39
Q

TRUE OR FALSE?

Trustees have legal to the property given to them, “in trust.”

A

TRUE

40
Q

TRUE OR FALSE?

Asset protection is one reason that agents usually advise clients to name direct beneficiaries, rather than their estate.

A

TRUE

41
Q

Ethic Terminology

Civil Fault

A

An action or omission which causes someone loss or harm for which the wrongdoer is liable.

If claiming to be the victim of civil wrongdoing, a client could initiate civil litigation against the agent or insurer depending on the case.

42
Q

The loss or harm in a Civil fault is not limited to the physical loss. Name some damages that involves a Civil Fault.

A
  • Injury to reputation (defamation);
  • Emotional injury;
  • Economic injury;
  • Violations of privacy;
  • Violations of property;
  • Violations of constitutional neglect.
43
Q

Ethics Terminology

Limitation Period

A

Timeframe during which a court action must be started, or the right to sue is lost forever.

Once someone discovers that civil wrongdoing has been done to them, the limitation period clock starts ticking.

44
Q

What are some federally sponsored or facilitated programs that prevent overpayment of benefits and apply
“coordination of benefits”?

A
  • Canada Pension Plan (CPP) and disability;
  • Old Age Security (OAS) and Guaranteed Income Supplement (GIS);
  • Employment Insurance (EI).
45
Q

What is the purpose of the CPP, OAS, and GIS?

A

To provide a secure, modest base upon which to build additional retirement income.

46
Q

TRUE OR FALSE?

Individuals who are employed or self-employed in Canada contribute to a mandatory pension plan.

A

TRUE

47
Q

TRUE OR FALSE?

CPP contributors cannot obtain a disability benefit if they become permanently and totally disabled.

A

FALSE

CPP contributors may also draw a disability benefit if they become permanently and totally disabled.

[Ref. 1.4.1.1]

48
Q

TRUE OR FALSE?

Old Age Security (OAS) is a contributory program.

A

FALSE

Old Age Security (OAS) is non-contributory and is government funded through duties and taxes.

[Ref. 1.4.1.1]

49
Q

TRUE OR FALSE?

The Guaranteed Income Supplement (GIS) is a non-taxable supplement for those already getting the OAS pension.

A

TRUE

50
Q

What is a Federally sponsored program where an individual must have a minimum number of insurable hours of employment before becoming eligible for benefits?

A

Employment Insurance (EI)

51
Q

What is the provincial sponsored program where compensation and rehabilitation benefits are available to the workers on a no-fault basis?

A

Worker’s Compensation

52
Q

What are the two federal legislations that govern how the federal government and its agencies handle personal information?

A
  1. Privacy Act
  2. Personal Information Protection and Electronic Documents Act (PIPEDA)
53
Q

Ethics Terminology

Personal Information Protection and Electronic Documents Act (PIPEDA)

A

Federal Privacy statute that sets out ground rules for how businesses and other organizations may collect, use or disclose personal information in the course of commercial activities.

54
Q

TRUE OR FALSE?

PIPEDA ensures that any information to conduct personal and business transaction should be collected.

A

FALSE

PIPEDA ensures that only information that is needed and relevant to conduct a business transaction should be collected.

Once the need for the information is over, the information should be disposed of in a careful fashion.

[Ref. 1.5.1.1]

55
Q

The provinces have appointed Privacy Commissioners, what are their mandates?

A

Under the matters of provincial or municipal jurisdiction, their mandate is directed at maintaining the privacy of health care information.

56
Q

Under which federal and provincial legislation that involves the Canadian federal law defining behaviour and actions that constitute a “crime” ?

A

Criminal Code

[Ref. 1.5.1.1]

57
Q

Which Canadian law aims at detecting individuals and corporations involved in criminal activity preventing them from getting their illegally obtained money into the banking system?

A

Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)

58
Q

Suspected money laundering or terrorist financing must be reported to an agency called…

A

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

59
Q

What is the name of the federal government system, under the Canadian Radio-television and Tele-communications Commission (CRTC), whereby clients may register their phone numbers and request that telemarketers do not call them?

A

National Do Not Call List (DNCL)

[Ref. 1.6.3]

60
Q

Agents making their own telemarketing calls DO NOT need to register to the national DNCL however they must subscribe to the criminal code act.

A

FALSE

Agents making their own telemarketing calls must register and subscribe to the national DNCL

[Ref. 1.6.3]

61
Q

Ethics Terminology

Canadian Anti-Spam Legislation (CASL)

A

Federal legislation that prohibits the sending of commercial electronic message (CEM) if the sender does not first have the recipient’s consent.

62
Q

Ethics Terminology

Genetic Non-Discrimination Act

A

Federal legislation law that prohibits anyone from forcing a person to undergo a genetic test as a prerequisite for providing them with goods or services.

63
Q

TRUE OR FALSE?

In regards to wills, the ownership of property held in “joint tenancy”, (with one or more persons) does not pass outside the will.

A

FALSE

Ownership of property held in
“joint tenancy” with one or more persons usually passes outside the will.

[Ref.1.2.7]

64
Q

TRUE OR FALSE?

Registered plans with a named beneficiary, including registered retirement savings plans (RRSP), registered retirement income funds (RRIF), and tax-free savings plans (TFSA), pass directly to the named beneficiary.

A

TRUE

65
Q

TRUE OR FALSE?

An insurance agency is either a corporation or a partnership that holds an licence from a regulator or several regulators.

A

TRUE

[Ref. 1.1.7]

66
Q

What is “Public Policy?”

A

Government laws and Legal principles with shared values on which social laws are based.

Example;

Ralph found a criminal who was willing to commit arson so Ralph could collect fire insurance money on a commercial property. Ralph paid the criminal $10,000 but the criminal promptly gambled the money away. Ralph could not get his money back. The contract was unenforceable—it was void because it was against public policy.

[Ref. 1.3]

ETHICS (OFFICIAL LLQP) (7 decks)

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