LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A business owner exposed to creditors names his estate as beneficiary for administrative simplicity. The agent should point out that:
- Aan estate designation gives the strongest possible protection from the owner's creditors
- Bthe estate designation has no effect because creditors cannot reach insurance money
- Ccreditor protection depends only on the province and never on who is designated
- proceeds paid to the estate are available to creditors and attract probate costs
Correct answer: D) proceeds paid to the estate are available to creditors and attract probate costs
Money paid to an estate is estate property, so it is exposed to creditors, probate fees and delay. Naming a family class beneficiary keeps the proceeds outside the estate and can protect them from the owner's creditors.
Why the other options are wrong
- AAn estate designation gives the weakest protection, not the strongest.
- BInsurance money in an estate is reachable like other estate assets.
- CThe identity of the beneficiary is central to the protection available.
Exam tip
Estate designation forfeits both probate bypass and creditor protection.
Common mistake
Recording an estate designation for simplicity without explaining the cost.
What this tests
CISRO competency component 1.5 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.