LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
A client stops paying premiums on a whole life policy with substantial cash value and assumes it has lapsed. In fact the automatic premium loan provision may have:
- Aconverted the policy into a term contract for the original face amount
- Bterminated the contract and paid out the cash value to the owner automatically
- Csuspended the death benefit until the owner resumed paying the premiums directly
- kept the policy in force by advancing premiums from the cash value as a loan
Correct answer: D) kept the policy in force by advancing premiums from the cash value as a loan
Where the provision is in effect, the insurer advances unpaid premiums against the cash value, so coverage continues while the loan and its interest accumulate. Coverage ends only when the cash value can no longer support the advances.
Why the other options are wrong
- AConverting to extended term is a different non-forfeiture option.
- BThe provision preserves coverage rather than terminating the contract.
- CThe death benefit continues while the loan supports the policy.
Exam tip
Cash value plus missed premium equals check the automatic premium loan first.
Common mistake
Assuming a policy with cash value lapsed the moment a payment was missed.
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.