LLQP Ethics & Professional Practice · Component 1.2 · 60% of the exam
A corporation as policyowner and beneficiary of a policy on a key employee:
- AIs not permitted, since a corporation cannot hold insurable interest in a natural person under the Insurance Act
- BMakes the employee the beneficiary automatically, since the policy is written on the employee's life
- Permitted where the corporation has insurable interest and the employee's consent, holding all rights
- DRequires the employee to own the policy, with the corporation named only as a collateral assignee
Correct answer: C) Permitted where the corporation has insurable interest and the employee's consent, holding all rights
Corporate-owned insurance is common for key person and buy-sell purposes. Roles must be documented correctly.
Why the other options are wrong
- AIt is permitted with insurable interest.
- BThe corporation is the beneficiary.
- DThe corporation owns the policy.
Exam tip
Key person: corporation owns and is beneficiary; employee is life insured.
Common mistake
Naming the employee's spouse as beneficiary of a key person policy.
What this tests
CISRO competency component 1.2 — 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 '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:
- The 'personal representative' (executor or administrator) of a deceased owner:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.