LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A designation of a beneficiary 'in trust' with a named trustee:
- AIs not allowed, since the insurer can pay only the person named as beneficiary and not an intermediary
- Directs the insurer to pay the trustee, who holds for the beneficiary under the terms specified; without terms, disputes arise
- CMakes the trustee the owner of the policy, with the right to change the beneficiary and surrender the contract at any time
- DCancels the beneficiary designation, since the trustee replaces the beneficiary in the insurer's records
Correct answer: B) Directs the insurer to pay the trustee, who holds for the beneficiary under the terms specified; without terms, disputes arise
Trust designations require care; referencing a formal trust document is best practice.
Why the other options are wrong
- ADesignations in trust are allowed.
- COwnership is unaffected.
- DThe beneficiary remains the beneficial recipient.
Exam tip
Trust designation: name trustee, specify terms.
Common mistake
Naming a trustee with no instructions.
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.