LLQP Ethics & Professional Practice · Component 2.1 · 40% of the exam
'Errors and omissions' insurance protects clients because:
- A client harmed by negligence has a source of compensation even if the agent lacks assets; regulators require it
- BIt pays claims under the policy when the insurer refuses, so the client is never left without the benefit
- CIt does not protect clients at all; it protects the agent's personal assets from the client's lawsuit
- DIt replaces the insurer's obligations, so a client may claim against the E&O insurer instead of the life insurer
Correct answer: A) A client harmed by negligence has a source of compensation even if the agent lacks assets; regulators require it
E&O is a consumer-protection requirement as much as an agent benefit.
Why the other options are wrong
- BIt covers the agent's liability, not policy benefits.
- CIt provides compensation to the harmed client.
- DE&O does not replace the insurer or its obligations.
Exam tip
E&O: compensation source for negligence; licence condition.
Common mistake
Lapsing E&O and continuing to practise.
What this tests
CISRO competency component 2.1 — 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.