OVERVIEW (LLQP Flashcards)

Question 1

DISCLAIMER

Answer 1

THANKS FOR JOINING THIS STUDY METHOD!

▼ Read the following for best results.

• All the questions and answers are taken from CISRO’s LLQP Life Insurance exam preparation manual.
• Increase your confidence level in passing your certification and provincial exams by exercising this study method often and frequently!
• The concepts here are simplified with basic definitions, true or false questions and important “need-to-know” key points to prep you in passing your exams.
• For effective results, download the app on your phone, study the chapters in order and aim for 90 - 100% on chapter quizzes and mock exams.
• The reveals (answers) don’t need to be word for word, as long as you understand the main concepts in your own words.
• If this study method has helped you in any way, feel free to share your comments, reviews and suggestions, I’d love to hear them!
• Contact me for the full access to all the decks.

Happy studying & good luck!
———————————————————

▼ Contact Information
- Email: Contact@MannyDain.com
- Mobile: 437-335-4710 (What’sApp Canada)
- Manny Dain |Financial Educator

Question 2

What are the documents that constitute the entire agreement between the parties of an individual life insurance contract?

Answer 2

• Application
• Policy
• Any document attached to the insurance policy when issued
• Any amendment (also called rider, endorsement, or addendum) to the policy agreed to in writing after the policy is issued.

(Refer to Section 2.6.1.1)

Question 3

Insurance companies, also known as insurers, can be incorporated in two different ways. What are the ways in which they can be incorporated?

Answer 3

Federally or provincially.

Federally incorporated companies are able to carry on business across the country, and provincially incorporated companies can only operate in the province in which they are incorporated.

(Refer to Section 4.1.1)

Question 4

Which organization is an association of insurers conducting business in Canada that has prepared a series of 18 guidelines for the guidance of its members to promote consistent practices and standards for the life and health industry?

Answer 4

The Canadian Life and Health Insurance Association (CLHIA).

(Refer to Section 2.6.5)

Question 5

Which organization is responsible for determining the financial soundness of federally incorporated life insurance companies?

Answer 5

The Office of the Superintendent of Financial Institutions (OSFI).

(Refer to Section 4.1.1)

Question 6

What are the legal requirements for an agent to sell insurance in Canada?

Answer 6

• Be licensed
• Enter into an agency contract
• Practice the highest standards of conduct
• Acquire errors-and-omissions (E&O) insurance.

(Refer to Chapter 1)

Question 7

Which Act regulates insurers at the federal level?

Answer 7

The Insurance Companies Act.

(Refer to Section 4.1.1)

Question 8

Over the years, the insurance acts of all the common-law provinces have become very similar. Collectively, the provincial acts are referred to as the Uniform Insurance Act. Québec, however, has a different insurance act. Why?

Answer 8

The provinces’ laws are based on common law, and therefore have a uniform act. Québec’s laws, however, are based on civil law and so it has a different insurance act.

(Refer to Section 1.2)

Question 9

Which body is responsible for governing the marketing of life insurance policies?

Answer 9

The provincial insurance acts are responsible for the marketing of life insurance products and are therefore regulated by provincial insurance regulators.

(Refer to Section 4.1.1)

Question 10

What type of law applies to the interpretation of a life insurance contract?

Answer 10

The law of the province or territory where the policy was contracted.

(Refer to Section 1.2)

Question 11

Civil fault is an action or omission which causes someone loss or harm for which the wrongdoer is liable. A breach of the privacy obligations of an agent could lead to a civil action against the agent in torts. A client claiming to be the victim of civil wrongdoing could initiate civil litigation against an agent. How can insurance agents protect themselves against a claim against them under tort law?

Answer 11

Life insurance agents protect themselves from claims by carrying errors and omissions (E&O) insurance.

Note: E&O insurance does not protect agents from intentional acts, misappropriations, fraud, or criminal activities such as forgery.

(Refer to Section 4.2.5.1)

Question 12

Assuris is a not-for-profit organization that protects Canadian policyholders if their life insurance company should fail. How does Assuris provide protection for insurance policyholders?

Answer 12

If a member insurance company becomes insolvent, Assuris facilitates the transfer of its policies to a solvent company and ensures benefits are continued under the original terms of the policy.

(Refer to Section 4.1.4.3)

Question 13

According to provincial insurance legislation, what is considered the minimum age for individuals to have the capacity to contract for insurance on their own behalf?

Answer 13

16 years

Provincial insurance legislation says that, for contracting a policy, a person 16 years of age or older has the capacity to contract for insurance on its own behalf.

(Refer to Section 1.2.3)

Question 14

Emma was filling out her insurance application and accidentally filled in the year of her birth as 1988 instead of 1989. Is this considered a mistake or a misrepresentation, and what is the difference?

Answer 14

This would be a mistake. Emma did not do this intentionally. Furthermore, there would be no benefit to the client to inform the insurance company that she is older than she really is, as this would result in a higher premium.

A mistake is not a conscious act, whereas a misrepresentation may not be a conscious act.

(Refer to Section 2.4.1.1)

Question 15

Clark is healthy, exercises regularly, and maintains a healthy diet. He works in an office as a graphic designer. However, Clark also likes to skydive a few times a year for fun. While meeting with his insurance agent, Clark decides not to mention the fact that he skydives. He has heard that he might have to pay a higher premium for having a “risky lifestyle” if he tells the insurance company about his hobby. Since he only does this a few times a year, he prefers not to tell them about it.

What type of misrepresentation is this, and how might it affect the policy?

Answer 15

Clark’s failure to disclose his skydiving hobby is considered material misrepresentation.

Material misrepresentation is a misrepresentation of a fact, which, if the truth had been known, might have resulted in the insurer refusing to issue the policy, or charging a higher premium for it.

(Refer to Section 2.4.1)

Question 16

What is the duration of the “incontestability” period?

Answer 16

The “incontestability” period is the first two years that a policy is in force.

(Refer to Section 2.4.1.2)

Question 17

All insurance contracts are unilateral contracts. What does this mean?

Answer 17

This means that the insurance company is the only party bound by the contract and is obliged to fulfill the contract, as long as premiums are paid, whereas the insured can cancel it at any time.

(Refer to Section 2.3.2)

Question 18

Jenny has two life insurance policies with JKL Insurance. The insured are her two daughters, Sarah and Jessica. Sarah is the beneficiary named on Jessica’s policy, and Jessica is the beneficiary named on Sarah’s policy. Which two parties have entered into an insurance contract and therefore have the contractual rights associated with these policies?

Answer 18

The two parties with contractual rights in an insurance contract are the insurance company that accepts the risk (the insurer – JKL Insurance), and the person who makes the contract with the insurer (the insured – Jenny). The insured can also be known as the policy owner.

(Refer to Section 2.1)

Question 19

Tommy has applied for life insurance on the life of his friend, Sam. Tommy does not have an insurable interest on Sam in any way, but he is willing to pay the premiums. How will the insurance company respond to this?

Answer 19

The insurance company will not issue the policy. A lack of insurable interest implies that the insurer should not issue the policy.

(Refer to Section 2.1.3)

Question 20

Devin purchased life insurance in 2009, naming his daughter Julie as the sole beneficiary on the policy. In 2010, he married Melissa and moved in with her and her daughter, Mandy. In 2012, Devin updated his will. In his will, Devin designates the proceeds of his life insurance policy to be split 50/50 between his daughter, Julie, and his new stepdaughter, Mandy. If Devin dies today, who would be considered the beneficiary of the policy?

Answer 20

Julie and Mandy.

If a beneficiary for insurance proceeds is named in a will, and a later declaration names a different beneficiary for insurance proceeds, the beneficiary named closest to the death of the insured will prevail.

(Refer to Section 1.2.7)

Question 21

Earl and Emily were married and lived together in a beautiful home in Toronto before they divorced. Earl and Emily were so busy moving into their new homes and splitting their bank accounts that they forgot to update their insurance policies. If Earl and Emily do not change the beneficiaries on their policies, and one of them dies, how will the fact that they are now divorced impact the death benefit?

Answer 21

The surviving ex-spouse would still receive the death benefit. Except in Québec, if the spouse of the policyholder has been named as the beneficiary, and the parties subsequently divorce, the divorce does not alter the rights of the former spouse as beneficiary.

(Refer to Section 1.2.7.1)

Question 22

Which party is said to control an insurance policy?

Answer 22

An insurance policy is controlled by the policy owner.

The policy owner names the beneficiary, decides whether to take a loan or make a withdrawal, is able to terminate the policy, and can decide if the policy should be assigned.

(Refer to Section 2.1.2)

Question 23

Andreas went into a financial institution to take out a loan to purchase a car. The financial institution insisted that he purchase a life policy to insure the loan.

Identify the professional standard that the financial institution has violated.

Answer 23

Tied selling.

(Refer to Section 4.2.3.1)

Question 24

What should agents do to demonstrate ethical behaviour to build a trusting agent–client relationship? (name at least three)

Answer 24

• Deal with conflicts of interest
• Perform client needs analysis
• Sell ethically
• Meet fiduciary obligations
• Comply with statutes, regulations, and codes of conduct

(Refer to Section 4.1)

Question 25

Dallas and Brendan both work for ABC Financial; Dallas works on the investment side and Brendan works in insurance.

Dallas and Brendan have a mutual client, Damien. Damien recently met with Brendan to purchase term insurance. He requested term insurance because he said that he was not able to afford high premiums. Brendan perceived Damien as someone who made a lot of money. He decided to double-check with Dallas on Damien’s income, and assets.

Would Dallas be in violation of a professional standard if he provided Brendan with this information? If so, which one?

Answer 25

Dallas would be violating privacy and confidentiality standards if he provided this information to Brendan.

(Refer to Section 4.1.4.1)

Question 26

Which organization’s mandate is to facilitate the detection, prevention, and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control?

Answer 26

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

(Refer to Section 4.1.4.2)

Question 27

What can regulatory authorities do if an agent’s conduct is deemed inappropriate, unethical, or illegal?

Answer 27

Suspend or revoke the agent’s licence

(Refer to Section 4.3.4)

Question 28

Gina is a life insurance agent. Her friend Matthew is a licensed real estate professional who has been helping Gina with many referrals for her business. Matthew receives a commission from Gina for the referrals.

What is Gina required to do with regard to this arrangement with Matthew?

Answer 28

Gina must disclose to her clients that there has been or will be a commission splitting and provide all relevant details of the commission splitting to her clients.

She should disclose details of referral arrangements to clients.

(Refer to Section 4.2.4.3)

Question 29

Jane is an insurance agent. She recently hired Kelly as her sales assistant. During their first review meeting, which was set up to discuss how Kelly was adjusting to her new position, Jane asks Kelly if she has life insurance herself. Kelly admits that she does not. Jane recommends that Kelly purchase a few different insurance policies for herself since that is the business she now works in.

What type of unfair trade practice is Jane using to sell life insurance to Kelly?

Answer 29

Undue influence.

This involves a person taking advantage of a position of power over another person. Since Jane is Kelly’s boss, she may feel that she needs to do everything Kelly tells her to in order to retain her job.

(Refer to Section 4.2.2.4)

Question 30

Misha is a very successful insurance agent. She has been the top agent at her company for 8 years in a row. Misha and her company are very proud of her continued success and were considering adding “top agent”’ to her business card.

Is there a professional standard that would be violated if Misha did this?

Answer 30

The Code of Ethics for agents stipulates that members cannot refer to sales results in the use of advertisements. Calling herself a “top agent” or “leading agent”’ would put Misha in violation of this policy. This falls under misrepresentation.

(Refer to Section 4.2.3.8)

Question 31

Denise has not been in the office very much this year, and her sales numbers are lower than usual. She has been in the business for several years and has several clients with in-force policies. In order to generate some revenue, Denise decides to replace some of her clients’ existing policies with new policies. To ensure that insurers do not realize this, Denise will make sure that her clients get new policies with a different company, even if they are a little more expensive.

What is the name for this prohibited practice?

Answer 31

Twisting.

Twisting occurs when an agent induces policyholders to surrender a policy with one insurer and replace it with another insurer, to the detriment of the policyholder.

(Refer to Section 4.2.3.2)

Question 32

Jerry meets with his insurance agent three times to ensure that the agent thoroughly understands his family’s needs and life insurance can meet these needs.

The insurance agent has spent considerable time educating Jerry and is concerned that he is not going to buy any insurance, even after all the time they have spent together. The agent offers Jerry a $200 rebate to help him make up his mind.

What type of unfair trade practice is the agent committing?

Answer 32

Premium rebating.

Agents cannot do anything that might sway the independent judgment of the client with respect to acquiring an insurance policy.

(Refer to Section 4.2.3.3)

Question 33

Errors and omissions (E&O) insurance is mandatory for insurance agents. Most provinces also mandate the amount of coverage each agent must have. E&O insurance protects both the agent and the customer.

How does E&O insurance provide protection for the client?

Answer 33

Clients can be confident that, in the event that they have to make a claim against an agent, there is sufficient financial backing to pay the claim.

(Refer to Section 4.2.5.1)

Question 34

TRUE OR FALSE?

You need a license to act as a deposit broker in Canada.

Answer 34

FALSE

Acting as a deposit broker for banks or other deposit-taking institutions in Canada does not require a licence.

At present, no regulatory authorities oversee the activities of these brokers.

[Ref. 4.3.6.1]