LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
A separation agreement requires a client to keep his former spouse as beneficiary of a policy. If he names someone else instead:
- Athe insurer will refuse to make the change because the separation agreement binds it directly
- Bthe former spouse automatically remains beneficiary regardless of the new form
- Cthe policy becomes void because the designation conflicts with a legal obligation
- the change may be effective with the insurer while exposing him to a claim for breach
Correct answer: D) the change may be effective with the insurer while exposing him to a claim for breach
An insurer acts on the designation filed with it unless notified of an irrevocable interest or a court order. The agreement binds the client, so breaching it exposes him and his estate to a claim by the former spouse.
Why the other options are wrong
- AAn insurer is not a party to the separation agreement.
- BThe designation on file governs what the insurer does.
- CA conflicting obligation does not void the insurance contract.
Exam tip
Support obligations are best secured by an irrevocable designation on file.
Common mistake
Relying on a separation agreement alone to protect a former spouse's interest.
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.