LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
The essential elements for a valid insurance contract are:
- Offer and acceptance, consideration, capacity, legality of purpose, and intention to create legal relations
- BA witness to the application, since an unwitnessed insurance contract cannot be enforced
- CA signature only, since the Act deems a signed application to be a binding contract of insurance
- DA medical examination, since the insurer cannot accept a risk it has not assessed through its own physician
Correct answer: A) Offer and acceptance, consideration, capacity, legality of purpose, and intention to create legal relations
General contract law applies to insurance with the added requirements of the Insurance Act. Each element must be present for the contract to exist.
Why the other options are wrong
- BWitnessing is procedural, not an element.
- CA signature evidences agreement but is not the whole contract.
- DMedicals are underwriting requirements, not contract elements.
Exam tip
Offer, acceptance, consideration, capacity, legality.
Common mistake
Assuming a signed application alone creates a contract.
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.