LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
Proceeds payable to a named beneficiary (not the estate) are:
- Outside the estate for probate, paid directly, and generally beyond the deceased's debts, with limited exceptions
- BSubject to probate, since all of the deceased's property must be administered by the executor before distribution
- CTaxable to the beneficiary as income, since the proceeds exceed the premiums the deceased paid
- DHeld by the executor until the estate is settled, then paid to the beneficiary net of the estate's debts
Correct answer: A) Outside the estate for probate, paid directly, and generally beyond the deceased's debts, with limited exceptions
The direct-payment route is the main estate advantage of insurance.
Why the other options are wrong
- BProceeds paid to a named beneficiary bypass probate.
- CLife proceeds are tax-free.
- DThey are paid directly to the beneficiary.
Exam tip
Named beneficiary: no probate, no estate creditors (limited exceptions).
Common mistake
Claiming absolute immunity from dependants' relief claims.
What this tests
CISRO competency component 1.5 — 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.