LLQP Ethics & Professional Practice · Component 1.4 · 60% of the exam
A participating policyholder has left dividends on deposit with the insurer for many years. At death these amounts will generally be:
- Aforfeited to the insurer, since dividends on deposit are not part of the contract's proceeds
- Bpaid only if the beneficiary specifically requests them within thirty days of the death
- paid in addition to the death benefit, together with the interest credited on them
- Dapplied to reduce the death benefit by the same amount that has accumulated
Correct answer: C) paid in addition to the death benefit, together with the interest credited on them
Dividends left on deposit accumulate with interest and belong to the policyholder. They are paid on top of the death benefit, and the interest credited on them is taxable to the policyholder while the policy is in force.
Why the other options are wrong
- AAccumulated dividends belong to the policyholder and are not forfeited.
- BPayment does not depend on a separate request from the beneficiary.
- DThey add to the proceeds rather than reducing the death benefit.
Exam tip
Dividends on deposit are paid in addition to the death benefit.
Common mistake
Overlooking accumulated dividends when estimating what a family will receive.
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.