EXAM PRACTICE QUESTIONS

Question 1

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

Answer 1

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]

Question 2

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.

Answer 2

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]

Question 3

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.

Answer 3

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

Question 4

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

Answer 4

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

Question 5

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

Answer 5

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]

Question 6

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

Answer 6

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]

Question 7

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.

Answer 7

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

Question 8

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

Answer 8

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]

Question 9

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.

Answer 9

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

Question 10

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

Answer 10

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

Question 11

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.

Answer 11

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]

Question 12

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.

Answer 12

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

Question 13

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.

Answer 13

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

Question 14

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.

Answer 14

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

Question 15

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.

Answer 15

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

Question 16

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.

Answer 16

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

Question 17

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.

Answer 17

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

Question 18

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

Answer 18

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

Question 19

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.

Answer 19

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

Question 20

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.

Answer 20

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)

Question 21

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.

Answer 21

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

Question 22

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.

Answer 22

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

Question 23

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.

Answer 23

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

Question 24

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.

Answer 24

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

Question 25

Celina is the head of a government agency and lives with her spouse, son, and mother. Celina’s father-in-law is currently unwell and stays with them in the in-law suite. Celina has a brother named Ethan, who is married to Emma. Which of Celina’s family members will NOT be considered a politically exposed person (PEP) when applying for an insurance product?

a) Emma

b) Celina’s father-in-law and Emma

c) Ethan and Emma

d) Celina’s father-in-law

Answer 25

Emma will NOT be considered a politically exposed person (PEP) when applying for an insurance product.

If a person is a PEP or an HIO, certain members of their family must also be considered PEPs or HIOs under the Act and its regulations. These family members are:

• their spouse or common-law partner;
• their biological or adoptive child or children;
• their mother(s) or
• father(s);
• the mother(s) or father(s) of their spouse or common-law partner (mother-in-law or father-in-law); and
• child (children) of their mother or father (sibling).

Reference: 4.1.4.2

Question 26

Margue is a self-employed accountant who earns about $60,000 annually. She is reviewing her financial situation and worried about what would happen if she was unable to work through no fault of her own. She knows that there is a risk she may become disabled or not earn enough during the slow seasons for accountants. Her friend, Ange is an accountant at a large company that lays staff off regularly. Ange always applies for employment insurance between contracts.

What should Margue be concerned about if she were not able to work?

a) Margue’s EI compensation will not be enough to sustain her during the slow seasons.

b) Margue will have to pay extra tax when she starts to receive EI.

c) Margue does not earn enough to receive EI

d) Margue does not qualify for EI because she is self-employed.

Answer 26

Employment insurance benefits are only available to Canadians who were employed and lost their job through no fault of their own. Self-employed individuals do not qualify for EI and Margue would not receive the benefit during the slow seasons.

Refer to section 1.4.1.3

Question 27

Less than two years ago, Carlton purchased a life insurance policy with a face amount of $500,000 from Protect Life Insurance Company. Last week, the insurer filed for bankruptcy. Carlton calls the insurance agent who sold him the policy and asks what will happen to his policy.

What does Carlton’s agent tell him?

a) Since the policy was owned for less than two years, he will get no protection.

b) Assuris will protect 75% of his policy’s face amount.

c) Assuris will protect 65% of his policy’s face amount.

d) Assuris will protect 85% of his policy’s face amount.

Answer 27

Assuris is a not-for-profit organization that protects Canadian policyholders should their life insurance company fail.

For policies with face amounts of $200,000 or less, Assuris protects 100% of the face amount.

For policies with face amounts greater than $200,000, Assuris protects 85% of the face amount or $200,000, whichever is greater.

(Refer to Section 4.1.4.3)

Question 28

Daisy, a new life agent, is finalizing a life insurance contract with a client and is having trouble remembering what special requirements need to be met for it to come into force.

Which of the following is NOT required to finalize the new contract?

a) Acceptance of the application by the insurer

b) Delivery of the policy and acceptance

c) Naming a beneficiary to the policy

d) Payment of the first premium

Answer 28

Unlike ordinary contracts, life insurance policies have several additional requirements before they are considered to be valid and in effect.

The sections below explain the rules:

• Application for insurance and representation of risk;
• Temporary or conditional insurance coverage;
• Changes in insurability;
• Acceptance of application by insurer;
• Payment of initial premium; and
• Delivery of policy.

Naming a beneficiary is not a requirement for a contract to come into force.

(Refer to Section 2.2.1 and subsections.)

Question 29

Hans purchased a policy for a face amount of $500,000 and named his current wife Sheila as the beneficiary. Later, he changed the beneficiary designation to include his two children from his previous marriage as equal beneficiaries. Sheila was unaware of the change of his beneficiary designation. Hans died recently and his ex-wife has made a claim for $50,000, as Hans had fallen behind in his child support payments. Hans also owed $30,000 in credit card debt.

What is the benefit amount that Sheila will receive from the policy?

a) $140,000

b) $150,000

c) $120,000

d) $420,000

Answer 29

The courts may allow an individual to claim insurance benefits where money is owed for spousal or child support. Hans’s ex-wife’s claim of $50,000 will be allowed, leaving behind $450,000 of the death benefit. As there are three beneficiaries, each will receive $150,000.

The benefits from Hans’ insurance policy would go directly to the three beneficiaries. So the benefits are not part of Hans’ estate. The creditors trying to claim money from the credit card debt would have to apply to Hans’ estate. They do not have any claim against the insurance benefits.

(Refer to Section 3.1)

Question 30

Milo purchased an immediate annuity contract last month and he received his first payment five days ago. He is facing financial difficulty, so he contacts his agent to surrender his contract and receive a refund as a lump-sum. Which of the following responses is the agent most likely to provide?

a) As it is an immediate annuity contract and payments have begun, Milo will not be permitted to surrender the contract.

b) Milo can receive a refund if he submits an application to surrender within 30 days of receiving his first payment.

c) Milo will have to wait until the contract’s anniversary date to be able to surrender the policy and get a refund.

d) As the annuity contract has been in effect for less than three months, Milo can surrender the contract anytime and get a refund within 15 days.

Answer 30

With respect to immediate annuities, as with most long-term, interest-bearing vehicles, withdrawal or surrender while the annuitant is alive is not anticipated and not generally permitted.

Ref: 2.6.4.5

Question 31

Sarah and Jean-Paul are divorced and have had an acrimonious relationship ever since. Sarah is often late with child and spousal support payments and is six months behind in payments when she is killed in a car crash. Jean-Paul is suing her estate for the support that he is owed. What course of action will the insurance company take, with regards to payment of the insurance benefits from Sarah’s life insurance policy which has her estate as the beneficiary?

a) The insurance company will pay the benefits to the court until the case is settled.

b) The insurance company will pay the benefits to the estate less the amount owed to Jean-Paul.

c) The insurance company will pay the benefits directly to the estate, and let the courts decide who receives the benefits.

d) The insurance company will not pay any benefits until the court case is settled.

Answer 31

It is possible for a creditor to make a claim under specific situations. A Court order may allow an individual to claim the insurance benefit, for example where money is owed for spousal or child support. The insurer must take care that any benefits payable are made to the estate or to the beneficiary or beneficiaries. In the event of a dispute, the insurer may pay the benefit into Court. The insurance company will pay the benefits into the court until the lawsuit is settled. In this case, the insurance company will pay the benefits to the court, until the lawsuit is settled.

Ref: 3.1.1

Question 32

Edgardo owns a mining company where several employees perform high risk tasks on a daily basis. Edgardo plans to purchase life insurance policies on his employees naming himself as the beneficiary. Though his employees were willing to sign the contract, he has not provided adequate safety measures to ensure a safe workplace environment. It is highly likely that he is trying to make a profit out it. For which of the following reasons is the contract unenforceable?

a) Because the contract is against public policy

b) Because there is no binding agreement

c) Because there is no insurable interest

d) Because it is a breach of duty of care

Answer 32

A contract or agreement established under Common Law principles is enforceable. It must be created by one or more parties with the shared intention of entering into a binding agreement. Since the employees in the scenario agreed to sign the contract, there is some agreement.

However, it is against public policy as Edgardo is trying to make a profit out of it by not considering employees’ safety at workplace. The subject matter of the contract must be acceptable under shared values described as public policy, which are the principles on which social laws are based.

Ref: 1.3

Question 33

Tina, a new agent, wants to know which of the following does NOT constitute part of the entire agreement between the insurer and the insured.

Which of the following is NOT part of the insurance agreement?

a) Application

b) Payment

c) Any amendment to the policy agreed to in writing after the policy is issued

d) Any document attached to the policy when issued

Answer 33

The following factors constitute the entire agreement between the parties: the application, the policy, any documents attached to the policy when issued, and any amendment agreed to in writing after the policy is issued.

(Refer to Section 2.6.1.1)

Question 34

Diana is a new life insurance agent and wants to know which of these products are not exempt from the requirements for ascertaining the clients identity under PCMLTFA and FINTRAC guideline 6A:

1 Immediate annuity
2 Deferred Annuity
3 Exempt life insurance policy
4 Tax-Free savings account (TFSA)

What do you tell Diana ?

a) 1 and 2
b) 2 and 3
c) 2 and 4
d) 3 and 4

Answer 34

1 & 2

Specific exceptions apply to the identity verification obligation. For example, an insurance of persons representative is not required to verify the identity of a person or confirm the existence of an entity at the time of purchase of a registered individual or group annuity contract (RRSP, RRIF, LIRA, LIF, DPSP, RPP, TFSA, etc.), exempt life insurance contract.

For non-exempt insurance and annuity contracts, the insurance of persons representative is required to verify the client’s or beneficiary’s identity using one of the methods permitted by the Act and its regulations.

The representative must do so for each policyholder or owner, including any co-policyholders, and for each beneficiary.

[Ref: 4.1.4.2]

Question 35

Edward drafted his will shortly after he married his first wife Donna in 2009. Edward and Donna started living separately in 2012 and formally signed a separation agreement in 2013. Their divorce was finalized in 2015. Edward remarried in 2018 to Lydia. Which statement best describes the validity of Edward’s will?

a) Edward would die intestate if he passes away.

b) Edward’s will was revoked when he divorced Donna

c) Edward’s will is still valid

d) Edward’s will was revoked upon signing the separation agreement

Answer 35

A will made before marriage is automatically revoked upon marriage unless the will was made with the marriage in mind. Edward’s marriage to Lydia voided his will and therefore, he would die intestate.

The separation of married partners has no effect on a will and signing a separation agreement may allow alimony claims to be made against the other spouse’s estate, but it does not usually affect voluntary gifts made by will or the designation of beneficiaries. 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.

Divorce does not revoke a will, and the will is interpreted as if the former spouse had predeceased the testator.

Ref: 1.2.7.1