LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
A policy 'lapses' when:
- AThe insurer decides it no longer wishes to carry the risk and gives thirty days' notice to the owner under the contract
- BThe beneficiary dies before the life insured, leaving no one to receive the proceeds
- CThe agent leaves the business, since the contract was serviced through the agent's licence
- A premium remains unpaid after the grace period and no non-forfeiture option keeps it in force
Correct answer: D) A premium remains unpaid after the grace period and no non-forfeiture option keeps it in force
Lapse is the consequence of non-payment. Cash-value policies may have non-forfeiture provisions that prevent or delay it.
Why the other options are wrong
- AInsurers cannot cancel for whim.
- BBeneficiary death does not affect the policy's status.
- CThe contract is with the insurer, not the agent.
Exam tip
Lapse = non-payment past grace + no non-forfeiture keep-alive.
Common mistake
Ignoring lapse notices.
What this tests
CISRO competency component 1.3 — 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.