LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A client named her three children equally, and one child dies before her leaving two young sons. Without a per stirpes direction the proceeds will normally:
- Apass in the deceased child's share to his own children by operation of law
- Bbe held by the insurer until the grandsons reach the age of majority in their province
- be divided among the two surviving children, with nothing going to the grandsons
- Dbe paid entirely to the estate because one named beneficiary has predeceased
Correct answer: C) be divided among the two surviving children, with nothing going to the grandsons
Where beneficiaries are named without a per stirpes direction, the share of one who dies first is generally divided among the survivors. A client who wants grandchildren to take that share must say so expressly.
Why the other options are wrong
- ARepresentation does not apply automatically without wording to that effect.
- BThe insurer pays the surviving beneficiaries rather than holding the funds.
- DThe designation survives as long as at least one named beneficiary is living.
Exam tip
Per stirpes wording is what carries a predeceased beneficiary's share to their children.
Common mistake
Assuming a grandchild automatically inherits a deceased parent's share.
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.