LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
An insurer treats a policy as lapsed although it never sent the notice the legislation requires. The likely consequence is that:
- the owner may have grounds to argue the policy remained in force, and the position must be examined
- Bthe lapse stands, because payment of the premium is the owner's responsibility alone
- Cthe policy converts automatically into a paid-up contract for a reduced amount
- Dthe insurer must issue an entirely new policy at the owner's original age and rate
Correct answer: A) the owner may have grounds to argue the policy remained in force, and the position must be examined
Where notice requirements apply and were not met, an owner may argue the termination was ineffective. The agent should gather the correspondence, raise it with the insurer and escalate through the complaints process if needed.
Why the other options are wrong
- BA statutory notice requirement is not satisfied by the owner's responsibility to pay.
- CNon-forfeiture options apply on their own terms, not as a remedy for notice failure.
- DThere is no obligation to issue a fresh policy at the original rate.
Exam tip
Check whether the required lapse notice was actually sent before accepting a lapse.
Common mistake
Accepting a lapse without checking the insurer's notice obligations.
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.