LLQP Ethics & Professional Practice · Component 1.4 · 60% of the exam
A client is shocked when his ten-year term premium jumps sharply at the end of the term. The agent should have explained at the outset that:
- Arenewal premiums are adjusted only for inflation since the policy was first issued
- Bthe premium is guaranteed for life once the first term has been successfully completed
- the renewal premium is set out in the contract and rises steeply at each renewal
- Dthe insurer reprices the contract at renewal based on the client's current health
Correct answer: C) the renewal premium is set out in the contract and rises steeply at each renewal
Renewable term contracts show the renewal rates in the policy schedule. They rise steeply because the insurer is taking on an older life without new evidence, so the client should know the numbers before the term ends.
Why the other options are wrong
- AThe increase reflects age and mortality rather than inflation.
- BThe premium is guaranteed for the term, not for life.
- DRenewal is without evidence of insurability, so health is not reassessed.
Exam tip
Renewal rates are printed in the contract; show them at the point of sale.
Common mistake
Selling a term premium as though it would continue past the initial term.
What this tests
CISRO competency component 1.4 — 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.