LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
A client's renewable term policy reaches the end of its term and she is now in poor health. The renewal provision means she:
- Amay renew only if she also converts the policy to a permanent contract
- may renew at the contract's scheduled rate without evidence of insurability
- Cmust provide evidence of insurability before the coverage can continue for a further term
- Dloses the coverage entirely because her health has deteriorated during the term
Correct answer: B) may renew at the contract's scheduled rate without evidence of insurability
A guaranteed renewable term policy continues for a further term at the rate set in the contract, with no new underwriting. The premium rises with age, which is the price of the guarantee.
Why the other options are wrong
- AConversion is a separate right and is not a condition of renewal.
- CRequiring evidence at renewal would defeat the purpose of the guarantee.
- DDeterioration in health is precisely what the renewal guarantee protects against.
Exam tip
Renewal is guaranteed without evidence; the premium rises with age.
Common mistake
Telling a client in poor health that a renewable policy must be re-underwritten.
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.