LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A named beneficiary tells the insurer she does not want the proceeds. Where she validly disclaims, the money will generally:
- Arevert to the insurer, which is entitled to retain the benefit when it is refused
- go to the contingent beneficiary if one was named, and otherwise to the estate
- Cbe shared among the deceased's other relatives in equal portions by the insurer
- Dbe paid to her anyway, since a beneficiary cannot refuse a benefit already payable
Correct answer: B) go to the contingent beneficiary if one was named, and otherwise to the estate
A disclaimer is treated as though the beneficiary had not survived, so the contingent designation takes effect. Without a contingent the proceeds fall into the estate, which is why contingent designations matter.
Why the other options are wrong
- AThe insurer does not keep proceeds that a beneficiary declines.
- CAn insurer does not distribute among relatives on a disclaimer.
- DA beneficiary may decline a benefit, and disclaimers do occur.
Exam tip
A disclaimer works like a predeceasing beneficiary; the contingent takes over.
Common mistake
Assuming a disclaimed benefit returns to the insurer.
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.