Life Flashcards
Sean is a smoker and travels frequently to developed countries to host scuba diving
tours. In the past year, he received two traffic violations for running a red light and
speeding. He drinks a glass of wine per week at social events. Sean is looking to buy life
insurance.
After learning about his lifestyle, which aspect will make his insurance a rated policy?
Travel history
Avocations
Driving record
You are completing a universal life application for your client Nixon. He has chosen
guaranteed investment accounts as his investment option. He is going to minimally fund
the policy. He asks you if there is any difference if he pays monthly or annually.
Which of the following is the correct answer?
a) Universal life has no modal factor and the long term cash value is the same,
whether paid monthly or annually.
b) Universal life has modal factor and long-term cash value will be higher if paid
annually.
c) Universal life has modal factor and long-term cash value will be higher if paid
monthly.
d) Universal life
Universal life has no modal factor and the long term cash value is the same,
whether paid monthly or annually.
Cindy, who is age 22, just returned to the work force last week after giving birth to twins.
She has limited disposable income. She is healthy now but her family history indicates
the incidence of stroke. She would like some insurance coverage for her children’s
education in the event of her death.
What kind of plan would you recommend to Cindy?
A term 10 policy, with GIB rider, so coverage can be increased in the future.
This is because at the moment the client has limited income, but the situation may
change and she may want to increase coverage in the future regardless of her state of
health
Marcel lives in Québec and purchased a $100,000 whole life insurance policy five years
ago from ABF Insurance Company, through its agent Paul Lacoursière, an old friend.
Paul contacted Marcel recently and proposed that he replace his existing policy with a
whole life policy for the same amount, but from the company that Paul currently
represents. Marcel agreed to sign the new application form.
What document is Paul required to have Marcel sign along with the new application
form?
The Notice of Replacement of Insurance of Persons Contract is the right answer, because Marcel lives in Québec. To protect clients against
churning and twisting, provincial legislation requires the client to receive and sign a
life insurance replacement declaration (LIRD).
LIRD for anywhere else other than Quebec
Grace’s personal net worth shows the following assets:
* RRIF: $420,000, all invested in GICs
* Home: $560,000
* Cottage: $320,000
* Savings account: $70,000
She also has the following liability:
* Mortgage on the cottage: $40,000
Based on the information provided, which of the following conclusions corresponds to
the Grace’s situation?
a) She has more than enough assets to last through her retirement.
b She has low risk tolerance.
c She has no need for life insurance.
d She is at least age 71.
b she has low risk tolerance because she does not have investments, paid off her debts and has a low amount owing on the cottage
Mike, who is single, recently decided to start investing after experiencing significant
market losses a few years ago.
Which of the following features of a segregated fund investment will be most important
for him?
a) Resets
b) Maturity guarantee
c) Death benefit guarantee
d) Bypass of probate
b) is the right answer. The maturity guarantee ensures that the segregated fund contract
owner will receive at least 75% of the amount initially invested on a given date (generally
speaking after a10-year period). The maturity guarantee is one of the advantages of
segregated funds. It will help allay Mike’s concerns since he has already experienced
significant losses in the past
Glenn is 68 and recently retired. He wishes to ensure that he will have income for the
rest of his life, but he is also aware that he could, potentially, live another 30 or more
years, and that inflation could erode his purchasing power during that time.
Which of the following investments would be most appropriate for him?
a) An insured annuity
b) A life annuity
c) 40% of his funds in an annuity with 60% of his funds in a balanced fund
d) 40% of his funds in an annuity with 60% of his funds in an equity fund
c) is the correct answer. Investing 40% of his funds in an annuity meets the need for
income throughout his lifetime, while investing 60% in a balanced fund provides the
growth potential of equity and the security of a fixed income. This investment choice
reflects Glenn’s needs.
d) is the wrong answer. While investing 40% of his funds in an annuity meets Glenn’s
need, investing 60% in an equity fund is too risky for a retiree like him who wants to
ensure an income that meets his needs for the rest of his life.
Brigitte is the beneficiary of a segregated fund that is maturing in two weeks. The
investment was originally made by her father, but he has told her that she can consider
the money as hers because he has become incapacitated and has signed a power of
attorney to this effect. She is happy about the 100% maturity guarantee on this
investment as the market value is currently less than the amount invested. Her father
made a partial withdrawal two years ago, but he believes the maturity guarantee still
applies.
Who can claim the proceeds and the guarantee that will be applied to this segregated
fund when Brigitte redeems it in two weeks?
c) The person with the power of attorney can claim the amount minus the partial withdrawal that her dad made.
Cis the right answer. The person with the power of attorney is the one who makes the
claim. Since the market value is lower than the guaranteed value, the guaranteed value
less the withdrawal will be paid out
On May 1st, Anne meets with her insurance agent, Greg, and decides to apply for a term life
policy. She completes the application and declines the temporary insurance agreement,
requesting instead “cash on delivery,” as she already has some coverage in force under another
contract.
On May 16th, Greg is advised by his head office that Anne’s application has been approved. On
May 20th, Greg delivers the policy to Anne and she confirms her banking information with him so
that she can begin her monthly premium payments as of May 25th.
When is Anne’s new policy deemed to be in force?
a) b) c) d) Anne’s policy is in force as of May 1st, the date of her application.
Anne’s policy is in force as of May 16th
, the date she was approved for coverage.
Anne’s policy is in force as of May 20th, the date it is delivered to her and she accepts it.
Anne’s policy is in force as of May 25th, the date the first month’s premium is received.
D Anne’s policy is in force as of May 25th, the date the first month’s premium is received.
Jennifer is Daryl’s third wife. One day, he suffers a massive heart attack at work and dies.
Jennifer remembers the insurance policies the couple took out when they were married three
years ago. Daryl has a $1M whole life policy and Jennifer is named as a revocable beneficiary
in the contract.
A short time after she begins the claim process with the aid of her lawyer, she receives notice
that there are other claimants. Daryl had fallen behind in his child support payments to his first
wife, to a total of $50,000. Furthermore, Jennifer finds out that Daryl had changed the
beneficiaries to herself and his two children (equally) from his first marriage about a year ago,
without her knowledge. Finally, a creditor has provided proof that Daryl pledged his policy
against a debt he owed them, in the amount of $50,000.
How much of the $1M death benefit will Jennifer be entitled to?
300,000
1000 000
-50,000
-50 000
=900000
900000 divided by 3 for the wife and the 2 children who are the beneficiaries
Newly licensed life insurance agent Glen meets with Denis who wishes to secure life insurance.
During the application process, Denis presents a credit card that expires next month, stating
that it is the only identification he has on hand, along with a bank cheque for the first month’s
premium.
To meet regulatory standards, what should Glen do?
a) Glen should not submit the application form because the credit card expires next month.
b) Glen should submit the application form using the bank account cheque information to
verify and record Denis’ identity.
c) Glen should not submit the application form because neither a credit card nor a bank
cheque are acceptable forms of identification.
d) Glen should submit the application form using the credit card to verify and record Denis’s
identity as the card is from a reputable financial institution.
c) Glen should not submit the application form because neither a credit card nor a bank
cheque are acceptable forms of identification.
such as a birth certificate, driver’s licence, passport, permanent resident card, Certificate of
Indian Status and record of landing
Marc-André, 37 years old, participates in his employer group insurance plan.
The plan provides a long-term disability insurance payable after employment insurance
benefits expire and corresponding to 50% of the non-taxable monthly salary.
With an annual salary of $60,000 and sole financial support of his 3 children, Marc-
André’s estimated current financial expenses are $3,500/month. If he were to become ill,
his personal savings would enable him to meet his financial requirements for 4 months.
What additional disability insurance coverage should Marc-André take out?
a) Marc-André does not need additional disability coverage.
b) Marc-André should purchase disability insurance of $500 per month with a 4-
month waiting period.
c) Marc-André should purchase disability insurance of $1,000 per month with a 4-
month waiting period.
d) Marc-André should purchase disability insurance of $1,500 per month with a 4-
month waiting period.
Marc-André should purchase disability insurance of $1,000 per month with a 4-
month waiting period.
After using his four months of Employment Insurance and his personal
savings, Marc-André will receive his employer’s plan disability benefit that
is equal to $5,000 X .50 = 2,500; therefore, Marc-André will need $3,500 -
$2,500 = $1,000/month.
Darius works for himself as an independent contractor, cutting lawns and maintaining
gardens. To protect his income against loss due to illness or injury, Darius took out an
individual disability income replacement policy. The policy has a $2,500 monthly benefit,
a 90-day waiting period, a 24-month benefit period and a recurring disability clause with
a 6-month recurrence period. A year after taking out the policy, Darius was injured when
his riding tractor overturned. He was off work for eight months with ruptured tendons in
his left leg and then returned to work. Four months later he re-injured the same leg due
to returning to work too soon and was off work for another eight months.
How much income replacement benefit would Darius have received for his disabilities?
a) $12,500.
b) $25,000.
c) $32,500.
d) $40,000.
Correct answer: c)
Calculations:
Darius would receive no benefits for the first three months of his first 8-month period
of disability, because the first three months were excluded from benefits by the 90-
day waiting period, leaving him with five months of benefits. Since the second period
of disability arose from the original cause and within six months of his returning to
work, no second waiting period would have applied and Darius would have received
benefits for the full additional eight months of disability. In total he would have been
paid for 13 months of disability ([8 – 3 = 5] + 8 = 13) at a rate of $2,500 a month, for
total benefits of (13 x $2,500) = $32,500.
Donald and Hilary are equal co-shareholders in a private corporation that runs their
dental practice. They have a buy/sell agreement that, among other provisions,
establishes the terms for a buyout should one of them become ill or injured and unable
to work in the practice for a prolonged period (six months or longer), providing for an
immediate buyout at the fair market value of the disabled shareholder’s interest. They
wish to fund this element of the agreement with corporate-owned disability insurance.
Which of the following provisions of disability insurance policies would match up with the
terms of the buy/sell agreement?
A A 180-day waiting period on each of the lives insured.
Félix is general manager of a legal firm, which offers a group insurance plan to its
employees. In addition to life insurance, the group plan offers short- and long-term
disability benefits as well as health and dental benefits.
You meet with Félix to renew the group insurance plan. During this meeting, Félix notes
that results regarding the plan’s claims experience show a high number of claims for
short-term disability insurance coverage. Félix recognizes that the stress to perform
within very tight deadlines explains a large part of the employee claims history. Félix
asks if you can propose a modification to the plan to improve results
What would you propose to him?
a) b) c) d) Reduce the short-term disability insurance waiting period.
Add an Employee Assistance Plan.
Add an insurance guarantee against critical illness.
Reduce the long-term disability insurance benefit amount.
Adding an Employee Assistance Plan, including
psychological counselling, would allow employees to develop coping
strategies to deal with stress at work and thereby decrease short-term
disability claims.
