EXAM PRACTICE QUESTIONS Flashcards
Jessica and Dan have been in a common-law relationship for twenty-five years. When they have a relationship breakdown, Jessica seeks legal counsel to better understand her property rights. What is the correct definition of division of property rights in their type of relationship status?
a) No presumed division
b) Presumed division
c) Defined division
d) Unprotected division
Property rights and obligations defined between a married couple and a common-law couple differ significantly.
Marriage assumes “presumed division” of property rights due to definitions within this formal legal status, whereas common law does not presume any division.
There is “no presumed division” of property rights in Jessica and Dan’s common-law relationship.
The division of assets can be clarified and defined in a co-habitation agreement, if a common-law couple enter into this domestic contract.
[Ref: 1.2.5]
The relationship between an insurance broker and an insurance company is called:
a) an agency relationship.
b) a fiduciary relationship.
c) a principal relationship.
d) an authoritative relationship.
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”. The principal controls the extent of the delegation. The scenario of an insurance company delegating its authority to an insurance broker is referred to as an agency relationship.
[Ref: 1.1.4]
Camilla, who did not have a will, recently passed away.
How will her assets be distributed?
a) Camilla’s assets from the estate will be distributed according to provincial law.
b) Camilla’s assets from the estate will be distributed according to federal law.
c) Camilla’s assets will be distributed according to the beneficiary designation of her registered accounts.
d) Camilla’s assets will automatically be distributed to any surviving family members.
An individual who dies without a valid will is said to have died intestate and the estate will be distributed according to applicable provincial intestacy laws which vary by province.
In terms of Camilla’s situation, only the assets within her registered plans will be distributed as per the beneficiary designation. Any assets not in these types of plans will be subject to the provincial intestacy laws.
Therefore, although an equal distribution to surviving members seems plausible—it will depend on the laws in place.
STUDY REFERENCE: 1.2.7 Wills, estates and successions
Ginny transferred full title to her property to a third party. The third party now has control of the property but is obligated to manage the property solely for the benefit of the named beneficiaries.
What is this type of an arrangement called?
a) A guardianship arrangement
b) An inter-vivos trust
c) A testamentary trust
d) A settlor trust
This type of arrangement is an inter-vivos trust because it refers to a transfer of property to a trust during the life of the settlor. The settlor is the person who created the trust and from whom the assets come.
A testamentary trust does not apply to this situation because it only comes into effect upon the death of the settlor. A guardianship arrangement has to do with guardianship of minors and is not applicable in property transfer.
STUDY REFERENCE: 1.2.8 Trusts and trustees
Abukcheech is a successful insurance advisor. He is getting ready to meet with a retired, high-net-worth client, who is considering an insured annuity strategy with a whole life insurance policy, a prescribed monthly income annuity, a disability insurance contract, and a segregated fund. Which of the products that Abukcheech presents to his client is NOT a life insurance contract?
a) Disability insurance contract
b) All are life insurance contracts
c) Annuity contract
d) Segregated fund
A disability insurance contract is an accident and sickness contract, not a life insurance contract.
A life insurance contract is one that covers the risk of death of one or more persons. An accident and sickness insurance policy covers the loss of health. A whole life insurance contract, a segregated fund, and an annuity are life insurance contracts.
[Ref: 1.1]
Chidinma was in an accident and suffered a head injury. She did not have a power of attorney. She was unable to manage her own affairs and her brother Kwame was appointed by the court to be her guardian. Which transaction would Kwame be permitted to carry out on Chidinma’s behalf?
a) Convert Chidinma’s term life insurance to a permanent policy
b) Purchase a new term insurance policy on Chidinma’s behalf
c) Purchase an annuity for Chidinma’s children
d) Update the beneficiary on Chidinma’s life insurance
Kwame, as the court-appointed guardian for Chidinma, an adult person who has become incapable, can transact insurance business concerning an existing policy, such as term renewal or conversion. The guardian can also buy segregated funds or annuity products as investments for Chidinma.
[Ref: 1.2.4.2]
Pippa and Paul have recently divorced after six years of marriage. Pippa was the beneficiary of her father’s life insurance policy and received the death benefit two years ago when he passed away. Paul purchased a whole life policy three years ago. He is the life insured and his estate is the beneficiary. Pippa and Paul have questions with regard to the division of these assets.
Which of the following is correct?
a) Both the proceeds of Pippa’s father’s life insurance policy and Paul’s whole life policy will be subject to division of property.
b) Neither the proceeds of Pippa’s father’s life insurance policy or Paul’s whole life policy will be subject to division of property.
c) Paul’s life insurance policy will not be subject to division, however the proceeds from Pippa’s father’s life insurance will be.
d) Paul’s life insurance policy will be subject to division, however the proceeds from Pippa’s father’s life insurance will not.
Generally, property acquired during the marriage will be subject to division. Even if it is owned and paid for by only one spouse as is the case with the life insurance. In most cases, property that came from an inheritance during the marriage is protected from division upon separation. Therefore, the whole life policy will be subject to division and the proceeds inherited would not be subject to division.
STUDY REFERENCE: 1.2.6 Divorce and separation
Phillip is 65 years old and is applying for OAS benefits. Which factor will be considered when determining his benefit amount?
a) Spousal status
b) Other income
c) Citizenship
d) Contributory period
Unlike the CPP, Old Age Security (OAS) is non-contributory and is funded by the government through duties and taxes. OAS pension benefits are considered as taxable income for the pensioner. The benefit amount depends on how long the resident has been in Canada since age 18, spousal status, and pensioner status of the other spouse.
[Ref: 1.4.1.2]
Hank, who had a sizeable life insurance policy, recently passed away. When processing the claim for his insurance, the insurer discovered there were conflicting claims from beneficiaries.
What action will the insurer take?
a) Pay the benefit into Court.
b) Pay the benefit in equal portion to all named beneficiaries.
c) Pay the benefit to the estate for distribution.
d) Pay the benefit according to provincial intestate laws.
If an insurer is faced with conflicting or difficult-to-reconcile claims of beneficiary entitlement, an insurer may utilize a statutory provision that permits payment into Court. This discharges the insurer from liability and allows for the resolution of the conflicting claims to be dealt with by the Court.
STUDY REFERENCE: 3.3 Payment into Court
Xavier had a critical illness insurance coverage of $50,000 that covered the following illnesses: cancer, heart attack, stroke, and major organ transplant. There was a refund of premiums upon death rider on the policy. Last week, Xavier died in a car accident.
How much will the named beneficiary on Xavier’s policy receive from the insurer?
a) Premiums paid to date
b) $50,000
c) $25,000
d) $0
Even if the insured dies for a reason not covered by the critical illness policy, such as a car accident, the premiums paid may be refunded to the named beneficiary. In fact, since there was a refund of premiums rider on Xavier’s policy, the beneficiary will receive a refund of the premiums paid to date.
Ref: 3.7.2.2
Martina has a $240,000 critical illness (CI) insurance policy. She was diagnosed with a covered illness. The survival period for the covered illness was 30 days. Martina submitted all the requested information for her claim to the insurer and the claim was approved.
How will her CI insurance benefit be paid to her?
a) A lump-sum payment of $240,000 will be made to Martina 30 days after the claim is approved.
b) Half of the benefit is paid when the diagnosis of the covered illness is confirmed, and the other half after the survival period.
c) A lump-sum payment of $240,000 will be paid to Martina at the end of the waiting period specified in the contract.
d) Martina will receive monthly benefits of $20,000 over a 12-month period.
Generally, for CI insurance, a lump-sum benefit payment will be made to the insured 30 days after the claim has been approved. The approval of the claim usually occurs at a different date than the end of the survival period.
[Ref: 3.7.2.2]
Barbara has been dealing with anxiety and depression which have been getting more severe and are interfering with her ability to go to work. She has group benefits which include long-term disability coverage.
Which of the following is true with regard to Barbara’s situation?
a) The insurer will complete an attending physician’s statement to assess Barbara’s claim.
b) Her group policy will pay a lump sum benefit to assist with living expenses while Barbara is away from work.
c) Her insurance may pay for therapy to assist in dealing with her condition.
d) Group disability policies only offer coverage for physical injuries or illness, so Barbara would not be eligible for a benefit.
Typically, both group and individual disability policies cover disability caused by physical illness and accidents as well as mental and psychological conditions.
Barbara will have to visit her doctor or another medical specialist to have the APS completed to verify her claim. Since claimants are required to reasonably assist in their rehabilitation, there may be opportunities to see additional specialists.
It may be possible for Barbara to see a therapist, at the expense of the insurer, to help with her situation.
Disability policies pay a periodic income replacement for the time the insured is disabled (possibly for a maximum time period) not a lump sum payment like critical illness coverage.
STUDY REFERENCE: 3.7.2.1 Documents required 3.7.2.2 Medical and other examinations
Mike dies at the age of 85 and he was a pensioner. He is survived by wife, Stella, and daughter, Kelly. There are no named beneficiaries to receive his pension. In this case, which of the following is the most likely outcome?
a) Stella will receive a survivor’s death benefit.
b) Kelly will receive a commuted lump-sum payment.
c) Mike’s pension will be paid to his estate.
d) Mike’s pension will be divided and paid equally to Stella and Kelly.
If a pensioner had an eligible spouse, the spouse may be entitled to a survivor’s death benefit, usually a reduced amount of the pension that was paid to the pensioner.
If there is no eligible spouse, a commuted lump-sum representing the remaining payments in any applicable guarantee (if any) period will be payable to the named beneficiary.
If there is no named beneficiary, it would be paid to the estate of the pensioner.
Ref: 3.8.2
Which of the following statements about insurance claimants is true?
a) A claim can be made by the insured or even the insured’s estate.
b) An assignee is not allowed to make a claim to the insurer.
c) A creditor cannot make a claim under any circumstance.
d) A contingent beneficiary can make a claim only by Court order.
A claimant may be the insured, the insured’s estate, or one or more designated beneficiaries (either a primary or contingent beneficiary).
An assignee of the insurance policy or the death benefit may also make a claim to the insurer. It is possible for a creditor to make a claim under specific situations.
Ref: 3.1.1
A few days after Giovanni died, the life insurance company where he held his life insurance policy receives claims from two different people:
Yolanda, his ex-wife, who is named as beneficiary on the policy. She has a 14-year-old son from her marriage with Giovanni.
Vittoria, his current wife, who is named as the sole beneficiary in Giovanni’s will, which was completed more recently than the beneficiary designation on the life insurance policy. Giovanni was the father of Vittoria’s 4-year-old daughter.
Both claimants are represented by lawyers, and the issue of who is the rightful beneficiary, especially given their financial dependency on Giovanni and the children involved, is escalating quickly.
If the insurer wants to avoid any liability in this disputed claim, what course of action should be taken?
a) Pay the benefit to Court.
b) Pay the benefit to Yolanda.
c) Pay the benefit to Vittoria.
d) Split the benefit equally between Yolanda and Vittoria.
In cases where the insurer may have trouble determining who the beneficiaries are, a provision in provincial and territorial insurance legislation allows the insurer to pay the benefit to Court. This releases the insurer from liability and allows for the resolution of the conflicting claims to be dealt with by a system designed to deal with reviewing evidence and claims adjudication.
Since both claimants in this case have grounds for a claim given the beneficiary designations and the financial dependency, for themselves and their children, the best way for the insurer to proceed to avoid any liability related to its decision is to pay the benefit to Court.
Ref: 3.1.1, 3.3
Jordan and his sister Julia are both beneficiaries of their mother Carmen’s life insurance policy. Jordan and Carmen were driving together and were both killed in a car accident.
Which of the following is correct with regard to the life insurance policy?
a) The timing of who died first has no material impact.
b) When there is more than one named beneficiary, the policy may state who is presumed to have died last.
c) If Jordan is proven to have outlived Carmen his estate will receive his share of the death benefit.
d) If Carmen was proven to have died first Julia would receive the entire amount of the death benefit.
In the case of a beneficiary and insured, the timing is important to determine whether the beneficiary predeceased or outlived the life insured.
If Jordan was proven to outlive Carmen, her insurance would pay out to his estate as she would have passed away first and he would, therefore, be entitled to his share of the death benefit.
Some policies will state who would be presumed to die first in the case of joint insureds.
Note that if Carmen was proven to predecease Jordan, he would be entitled to receive the benefit, which would then be paid to his estate. Thus, Julia would not receive the entire death benefit.
STUDY REFERENCE: 3.2.1 Death of two or more people
Adele has a life insurance policy where she is the life insured and her daughters, Maria and Lilly, are the beneficiaries. Adele and Maria die in a bus accident. It is presumed that Adele died before Maria based on how they were seated in the bus. In this case, who will receive the life insurance benefit if a claim is made?
a) Since Maria outlived Adele, Maria’s share of the proceeds will be paid to her estate.
b) Since both Adele and Maria died, the whole insurance benefit will be paid to Lilly.
c) Since both Adele and Maria died, the whole insurance benefit will be paid to Adele’s estate.
d) Since Maria died along with Adele, Maria’s share will be withheld by the insurer.
Where two or more people pass away, the time and sequence of deaths may also be important in order to establish who may be entitled to the insurance proceeds.
If the joint insured persons die in an accident where it is not possible to prove who died first or last, the policy may state who is presumed to have died first.
This may also arise when it is necessary to determine whether a beneficiary outlived or predeceased the life insured.
Therefore, since Maria outlived Adele, Maria’s share of the proceeds will be paid to her estate.
Ref: 3.2.1
Why is an insured person’s proof of age critical in case of a term coverage?
a) Because the policy states the age at which the coverage expires
b) Because the premiums are solely based on the insured’s age
c) Because the policy cannot be terminated due to age discrepancies
d) Because only individuals within the age range of 20-50 years are eligible for term coverage
Proof of age is usually established when applying for insurance and premiums are usually adjusted based on the “true age” of the life insured. If the age was satisfactorily established by the agent when the policy was issued or while the life insured was still alive, the insurer will use age indicated in the file when a claim is made, without requiring proof. Proof of age is required for all insurance, but it is deemed critical for term coverage since the insurance policy usually states that it expires at a certain age.
Ref: 3.1.4.3
Alanzo is the beneficiary of a life insurance policy that he has purchased on his wife Gaby’s life. Gaby dies under suspicious circumstances. Disputes arise as to whether Alanzo caused her death. In this case, if Alanzo makes a claim, what outcome can be expected?
a) The insurer will likely pay the benefit to Court.
b) Since Alanzo is not convicted yet he will still receive the benefit.
c) The insurer will terminate the policy as it is against public order to pay.
d) Since Alanzo is a suspect, the insurer will pay Gaby’s estate.
In some cases, a provision in provincial and territorial insurance legislation allows the insurer to pay the benefit into Court.
This releases the insurer from liability, and allows for the resolution of the conflicting claims to be dealt with by a system designed to deal with reviewing evidence and claims adjudication.
Ref: 3.6.1
Ted owns a permanent life insurance policy with his wife Laura as the life insured and has named himself as the beneficiary. Laura dies and Ted receives the death benefit from the policy. Unfortunately, Laura had a lot of creditors and Ted is surprised to receive letters from creditors demanding that he clear the debts using the proceeds of the life insurance policy. Are the life insurance proceeds protected from Laura’s creditors?
a) The proceeds are protected because Ted is Laura’s spouse and is, therefore, a preferred beneficiary.
b) The proceeds are not protected because Ted, as the policy owner, does not fall under the restricted definition of beneficiary.
c) The proceeds are protected because the policy was owned by Ted and not Laura.
d) The proceeds are protected because life insurance proceeds are always protected from creditors.
It all comes down to the fact that Ted is both the policy owner and the beneficiary: under provincial insurance legislation, if you are the policy owner and the beneficiary, you do not meet the legal definition of beneficiary and thus there is no creditor protection.
To fix this problem, (i.e., to make the death benefit creditor protected), Laura needs to be the policy owner and life insured while making her husband the beneficiary only. Note that nowadays, the life insured is also usually the policy owner (i.e., you take out and own the policy on your own life).
There is also a difference between the legal definition of beneficiary and the term beneficiary used every day. The term “beneficiary,” as contained in the provincial insurance legislation, has a restricted meaning for some legal purposes.
(Refer to Section 2.1.4.2)
Zoey is 65 years old and lives with her only son, John. She receives $2,500 every month from a life annuity contract. She has not named a beneficiary to the contract and there is no guarantee period. If Zoey dies, what will happen to the balance of the funds in the annuity contract?
a) It will not be paid as there is no beneficiary and no guarantee period.
b) It will be paid to Zoey’s estate as there is no beneficiary to the contract.
c) It will be paid to John as he is Zoey’s only son with whom she lived.
d) It will be paid to the court which will then appoint a trustee for distributing the funds.
The balance will not be paid as there is no beneficiary and no guarantee period.
When the life insured under an annuity contract dies, the beneficiary or the estate is usually entitled to a death benefit. However, it is not the case when the annuity contract was an immediate life annuity contract that has begun to pay benefits to the annuity grantee that had no guarantee period, or with a guarantee period that has passed.
Reference: 3.8
Which of the following instances will be considered discrimination NOT permitted by human rights legislation?
a) Vickey, an insurance agent, declines a client’s request to purchase a life insurance policy because of the client’s national origin.
b) Jones, aged 60, applies for long-term care insurance and the insurance company declines his application owing to his age.
c) Maria and Adam both apply for disability insurance coverage, and all factors being equal, Maria’s premiums are higher than those of Adam’s.
d) Hannah, aged 50, was recently diagnosed with a heart disease and her life insurance application was declined due to her health status.
Vickey declining a client’s request based on the client’s national origin is discrimination.
Other instances can be justified. Discrimination is forbidden on the basis of gender, religion, skin colour, national origin, family status, marital status, sexual orientation, and age.
Insurers, however, 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
Angelo purchases a registered annuity contract form XYZ Insurers, through his agent. His immediate family comprises of his wife and a son. Which of the following is true about the parties involved in Angelo’s annuity contract?
a) Angelo will be the policyholder, the annuitant, and the payee.
b) Angelo must name someone else other than himself as the annuitant.
c) Angelo will be the policyholder and must assign someone else as the annuity grantee.
d) Angelo will be the policyholder and his wife or son will be the payee.
For all registered contracts (RRSP, RRIF, LIF, LIRA, DPDP, TFSA, etc.), the policyholder, the annuitant (life insured) and the payee are always the same person. Hence, Angelo will be the policyholder, the annuitant, and the payee.
Ref: 2.6.4.4
Courtney is a licensed life insurance agent in Ontario. She is moving and will be licensed in Quebec. Which of the following distinctive feature is she likely to notice in Quebec from a regulatory perspective?
a) The discipline of agents and the discipline of corporate agencies have different regulators.
b) Life insurance agents and accident and sickness agents have different regulators.
c) Life insurance agents and insurers have different regulators.
d) Life insurance brokers and independent agencies have different regulators.
In Quebec, the discipline of life insurance agents and accident and sickness insurance agents is the responsibility of the Chambre de la sécurité financière (CSF), while the Autorité des marchés financiers (AMF) is responsible for the supervision and discipline of corporate agencies (firms and independent partnerships).
In Québec, life insurance agents, accident and sickness insurance agents, insurance brokers, and independent agencies are licensed by the AMF, which also regulates insurers.
Ref: 4.1.2.5, 4.1.2.6
