LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
'Non-forfeiture' options in a cash-value policy:
- AApply to term policies, which build a cash value that the owner may use on lapse
- BAre optional for the insurer, which may withhold the cash value if the owner stops paying
- CForfeit the cash value on lapse, which is why the owner should surrender the policy before the grace period ends
- Let the owner use the cash value on lapse as cash, reduced paid-up, extended term or a premium loan
Correct answer: D) Let the owner use the cash value on lapse as cash, reduced paid-up, extended term or a premium loan
Non-forfeiture protects the equity built up in permanent policies. Automatic premium loan is the default that prevents lapse in many contracts.
Why the other options are wrong
- ATerm has no cash value.
- BThey are provided by the contract.
- CThe point is that value is not forfeited.
Exam tip
Non-forfeiture: cash, reduced paid-up, extended term, APL.
Common mistake
Letting a permanent policy lapse without explaining the options.
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.