LLQP Ethics & Professional Practice · Component 1.4 · 60% of the exam
A couple wants coverage to fund the tax arising when the second of them dies. The provision suited to this need is:
- Atwo entirely separate term policies, each one paying when that particular insured person dies
- Ba joint first-to-die policy, which pays on the earlier of the two deaths to occur
- a joint last-to-die policy, which pays when the second of the two insured persons dies
- Da single policy on the older spouse, since that death is likely to come first
Correct answer: C) a joint last-to-die policy, which pays when the second of the two insured persons dies
A spousal rollover usually defers the tax until the second death, so that is when the money is needed. A last-to-die contract matches that timing and generally costs less than insuring either life alone.
Why the other options are wrong
- ASeparate policies pay at each death rather than at the second one.
- BA first-to-die contract pays when the money is not yet needed.
- DThe older spouse may not be the second to die.
Exam tip
Tax at the second death equals a last-to-die policy.
Common mistake
Using first-to-die coverage for a liability that arises at the second death.
What this tests
CISRO competency component 1.4 — 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.