LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
A client asks whether the insurer can cancel her in-force whole life policy because she developed a serious illness. The correct answer is:
- AYes, with 30 days' notice, since the Act lets an insurer withdraw from a risk that has materially worsened
- BYes, at any time, since a life policy is renewed annually at the insurer's discretion like other insurance
- COnly if she is over 65, since the insurer's obligation to continue coverage ends at the normal retirement age
- No; once in force and past contestability, absent fraud, the insurer cannot cancel for changes in health
Correct answer: D) No; once in force and past contestability, absent fraud, the insurer cannot cancel for changes in health
Life insurance is a unilateral contract: only the owner can end it (or lapse it). Health changes after issue are the insurer's risk.
Why the other options are wrong
- AInsurers have no right to cancel an in-force life policy on notice.
- BInsurers cannot cancel for health.
- CAge has no bearing on the insurer's inability to cancel.
Exam tip
In-force life policy: insurer cannot cancel for health changes.
Common mistake
Worrying a client that a new illness threatens their coverage.
What this tests
CISRO competency component 1.3 — 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.