LLQP Ethics & Professional Practice · Component 1.6 · 60% of the exam
Interest on death benefits:
- Is payable under the Act from death to payment at a prescribed rate, so claimants are not disadvantaged
- BIs taxable to the insurer, which deducts the tax before paying the balance to the beneficiary along with the death benefit
- CIs paid only if the claimant sues, since the Act treats interest as damages for the insurer's delay
- DIs never paid on a death benefit, since the proceeds are a fixed contractual amount that does not grow
Correct answer: A) Is payable under the Act from death to payment at a prescribed rate, so claimants are not disadvantaged
Statutory interest accrues on delayed payments; the interest portion is taxable to the beneficiary.
Why the other options are wrong
- BInterest is taxable to the recipient.
- CInterest accrues automatically; no lawsuit is needed.
- DStatutory interest is payable on delayed death benefits.
Exam tip
Interest accrues from death; the interest portion is taxable.
Common mistake
Forgetting that the interest (not the benefit) is taxable to the beneficiary.
What this tests
CISRO competency component 1.6 — 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.