LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
An insurer 'rescinds' a policy within the contestability period by:
- Declaring the contract void from inception for material misrepresentation and refunding premiums
- BReducing the benefit to the amount the insurer would have issued had the truth been known
- CKeeping the premiums paid and denying the claim, since the applicant's misrepresentation forfeits them
- DCancelling the policy for the future only, with coverage remaining for any death that occurred before the notice was sent
Correct answer: A) Declaring the contract void from inception for material misrepresentation and refunding premiums
Rescission is void ab initio with restitution — the remedy for misrepresentation.
Why the other options are wrong
- BRescission voids; it does not reduce.
- CPremiums are refunded on rescission.
- DRescission is void from the beginning.
Exam tip
Rescission = void from inception + premium refund.
Common mistake
Confusing rescission with cancellation going forward.
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.