LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A designation gives one beneficiary a stated share and leaves the remainder unallocated. The unallocated portion will generally:
- Abe retained by the insurer until the client's executor gives it a direction
- Bbe added to the named beneficiary's share so the whole benefit is directed
- Cbe divided equally among the client's living relatives in order of closeness
- fall into the estate, with probate and creditor exposure applying to it
Correct answer: D) fall into the estate, with probate and creditor exposure applying to it
Any part of the benefit not directed to a named beneficiary goes to the estate by default. Checking that shares total the whole benefit is a simple step that avoids an unintended estate payment.
Why the other options are wrong
- AThe undirected share is paid to the estate rather than held indefinitely.
- BAn unallocated share is not simply absorbed by another beneficiary.
- CAn insurer does not distribute among relatives by closeness.
Exam tip
Shares that do not total the whole benefit send the remainder to the estate.
Common mistake
Submitting a designation without checking that the shares add up.
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.