LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A business owner names his wife irrevocably to strengthen creditor protection. He should understand that an irrevocable designation means:
- AThe beneficiary can change the designation, since the vested interest gives the beneficiary control of the policy
- The owner cannot change it, assign, surrender or borrow without the beneficiary's consent; the interest vests
- CThe owner keeps full control of the policy, and the designation simply cannot be altered by a will
- DIt ends automatically at divorce, since a former spouse cannot hold an irrevocable interest in a policy
Correct answer: B) The owner cannot change it, assign, surrender or borrow without the beneficiary's consent; the interest vests
Irrevocable designations lock in the beneficiary's rights; they are used in family law and creditor planning.
Why the other options are wrong
- AOnly the owner, with the beneficiary's consent, can change it.
- CControl is restricted.
- DAn irrevocable designation does not end automatically at divorce.
Exam tip
Irrevocable: consent needed for changes, assignments, surrenders, loans.
Common mistake
Ticking irrevocable without explaining loss of control.
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.