LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An agent's obligation when a client's premium is about to lapse is to:
- APay the premium on the client's behalf, since a short advance is a small price to keep valuable coverage in force
- BCancel the policy before the grace period ends, so the client does not owe the overdue premium to the insurer
- Contact the client, explain the consequences and options, and document the contact; ignoring it risks negligence
- DTake no action, since the lapse notice is the insurer's communication and the client's response is the client's business
Correct answer: C) Contact the client, explain the consequences and options, and document the contact; ignoring it risks negligence
Courts have found agents liable for failing to warn clients of impending lapse in some circumstances.
Why the other options are wrong
- AAn agent must never pay client premiums.
- BCancellation is not the agent's role.
- DThe agent has a service duty and liability.
Exam tip
Lapse warning: contact, explain, document.
Common mistake
Ignoring lapse notices copied to the agent.
What this tests
CISRO competency component 2.2 — Integrate into practice the rules governing the activities of life insurance agents — which is weighted at 40% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 2
- A prospective client wants to confirm that an agent is properly licensed before meeting him. She should:
- A dual-licensed agent's mutual fund business is reviewed following a client complaint. The review will be conducted by:
- Assuris coverage applies to:
- OLHI's services are available to:
- Complaints about an agent's conduct (as opposed to an insurer's claim decision) should be directed to:
- The best summary of an agent's ethical obligations is to:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.