LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
A client returns her newly delivered policy within the rescission period stated in the contract. The insurer must:
- refund the premiums paid and treat the contract as though it had never been issued
- Brefund the premiums less an administrative charge for having issued the contract
- Ckeep the policy in force until the end of the first year and refund nothing at all
- Dconvert the policy into a smaller paid-up contract in place of any refund of premium
Correct answer: A) refund the premiums paid and treat the contract as though it had never been issued
The rescission or free look right lets an owner cancel within a short period after delivery and receive the premiums back. The agent must draw the right to the client's attention at delivery.
Why the other options are wrong
- BPremiums are returned without a deduction for administration.
- CThe contract does not continue once the right has been exercised.
- DA paid-up contract is not a substitute for the refund.
Exam tip
Rescission returns the premiums and unwinds the contract entirely.
Common mistake
Failing to point out the rescission right when delivering the policy.
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.