LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
If the first premium cheque is returned NSF after the policy is delivered:
- AThe agent pays the premium personally, since the agent accepted the cheque and is responsible for its clearance
- BNothing happens, since the policy was delivered and the insurer's remedy is to add the amount to the next premium notice sent to the owner
- CCoverage continues indefinitely, since delivery of the policy completed the contract regardless of payment
- The consideration has failed; the policy is treated as not in effect unless paid promptly, and the agent must resolve it
Correct answer: D) The consideration has failed; the policy is treated as not in effect unless paid promptly, and the agent must resolve it
No premium, no contract. Prompt resolution protects coverage.
Why the other options are wrong
- AAgents never pay client premiums.
- BCoverage is at risk when the first premium fails.
- CPayment is a condition of the contract.
Exam tip
NSF first premium → no consideration → act immediately.
Common mistake
Advancing the premium personally for the client.
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.