LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
'Consideration' in a life insurance contract consists of:
- AThe agent's commission, which the insurer pays in exchange for the agent producing the application and the client's signature
- BThe medical examination the applicant undergoes, which is the applicant's contribution to the bargain
- The applicant's premium and application statements in exchange for the insurer's promise to pay
- DThe beneficiary's acceptance of the designation, which completes the exchange of promises
Correct answer: C) The applicant's premium and application statements in exchange for the insurer's promise to pay
Without payment of the first premium there is generally no contract; the insurer's promise is its consideration.
Why the other options are wrong
- ACommission is between insurer and agent.
- BUnderwriting evidence is not consideration.
- DBeneficiaries give nothing.
Exam tip
Premium + application statements ↔ insurer's promise.
Common mistake
Delivering a policy without collecting the first premium.
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.