LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
An insurer issues a policy with a rating the applicant did not request. In contract terms this issued policy is:
- Avoid, because an insurer cannot alter the terms an applicant proposed on the application
- Bbinding immediately, because the insurer's underwriting decision is final and conclusive
- a counter-offer, which takes effect only when the applicant accepts the amended terms
- Dan acceptance of the original offer, so coverage began when the application was signed
Correct answer: C) a counter-offer, which takes effect only when the applicant accepts the amended terms
Issuing on different terms rejects the original offer and proposes new ones. Acceptance usually occurs when the applicant takes delivery and pays while still insurable, which is why delivery requirements matter.
Why the other options are wrong
- AAn insurer may propose amended terms rather than accept as applied.
- BA counter-offer binds nobody until it is accepted by the applicant.
- DDifferent terms mean the original offer was not accepted.
Exam tip
Rated or modified issue equals a counter-offer requiring the client's acceptance.
Common mistake
Treating a rated policy as in force before the client has accepted it.
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.