LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A creditor of the beneficiary (not the owner):
- AHas priority over the beneficiary, since the insurer must pay the creditor before releasing the balance
- Is not affected by the exemption once proceeds are paid; the exemption protects against the owner's creditors
- CIs barred by insurance law from ever reaching the proceeds, however long the beneficiary has held them or how they were invested
- DCan seize the policy before the life insured dies, since the beneficiary's interest is an asset
Correct answer: B) Is not affected by the exemption once proceeds are paid; the exemption protects against the owner's creditors
The exemption's scope is limited to the insured's creditors. Settlement options or trusts can protect vulnerable beneficiaries.
Why the other options are wrong
- AOnly after receipt, like any asset.
- CThe exemption does not cover the beneficiary's creditors after payment.
- DA revocable beneficiary has no seizable interest before death.
Exam tip
Exemption shields against the owner's creditors, not the beneficiary's after payment.
Common mistake
Promising a beneficiary that proceeds are immune from their own creditors.
What this tests
CISRO competency component 1.5 — 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.