LLQP Ethics & Professional Practice · Component 1.1 · 60% of the exam
'Insurable interest' in life insurance means:
- AOwnership of the policy, since only the owner has an interest in whether the contract is enforced
- BBeing named as beneficiary, since the beneficiary is the person who stands to gain from the death
- CAny expectation of profit from the death, however it arises, provided it can be quantified in money at the time of the claim
- A legally recognized interest in the life insured when the contract is made, or the insured's consent
Correct answer: D) A legally recognized interest in the life insured when the contract is made, or the insured's consent
Insurable interest (or the insured's written consent) prevents wagering on lives. It is required at inception, not at death.
Why the other options are wrong
- AOwnership follows from a valid contract; it is not the test.
- BA beneficiary need not have insurable interest.
- CProfit motive alone is not insurable interest.
Exam tip
Insurable interest at inception or the insured's consent; beneficiaries need none.
Common mistake
Believing insurable interest must exist at the time of death.
What this tests
CISRO competency component 1.1 — 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.